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The Power of Peers: Prompting Savings Behavior Through Social Comparison

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  • Martina Raue
  • Lisa A. D'Ambrosio
  • Joseph F. Coughlin

Abstract

In 2 experimental studies (Study 1: n = 1,155; Study 2, n = 630), the authors used a social norms approach to promote savings behavior. Many people do not save enough for retirement, which may be due to uncertainty about the future or saving plans. Making social comparisons can reduce uncertainty and upward comparisons can provide the motivation to improve. For this reason, the authors gave participants social feedback on their savings decisions. Participants who were randomly told that they underperformed in comparison with their peers were more likely to make changes to their allocation. In Study 1, this group increased their savings more than were those who had been categorized among the better performers or overperformers, or who did not receive social information. Participants were generally more likely to change their behavior when they perceived their performance as being average or below average. The results demonstrate that a social comparison approach has the potential to motivate people to start saving for retirement or increase their current savings.

Suggested Citation

  • Martina Raue & Lisa A. D'Ambrosio & Joseph F. Coughlin, 2020. "The Power of Peers: Prompting Savings Behavior Through Social Comparison," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 21(1), pages 1-13, January.
    • Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:1:p:1-13
    DOI: 10.1080/15427560.2019.1587762
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    Cited by:

    1. Adam Ndou & Sam Ngwenya, 2021. "An Analysis of Personal Financial Literacy among Adults in Vhembe District, A Rural Municipality in South Africa," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 9(1), pages 55-66.
    2. Andrieş, Alin Marius & Walker, Sarah, 2023. "When the message hurts: The unintended impacts of nudges on saving," Journal of Comparative Economics, Elsevier, vol. 51(2), pages 439-456.
    3. Thomas Lange, 2021. "Job Satisfaction and Implications for Organizational Sustainability: A Resource Efficiency Perspective," Sustainability, MDPI, vol. 13(7), pages 1-17, March.
    4. Rishi Manrai & Kriti Priya Gupta, 2023. "Investor’s perceptions on artificial intelligence (AI) technology adoption in investment services in India," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 28(1), pages 1-14, March.

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