IDEAS home Printed from https://ideas.repec.org/p/lvl/crrecr/1703.html
   My bibliography  Save this paper

Peer Effects and Risk-Taking Among Entrepreneurs: Lab-in-the-Field Evidence

Author

Listed:
  • Steeve Marchand
  • Maria Adelaida Lopera

Abstract

We study how social interactions influence entrepreneurs' attitudes toward risk. We conduct two risk-taking experiments within workshops organized for young Ugandan entrepreneurs. Between the two experiments, the entrepreneurs participate in a networking activity where they build relationships and discuss with each other. We collect detailed data on peer network formation and on participants' choices before and after the networking activity. Our design implicitly controls for homophily effects (i.e. the tendency of individuals to develop relationships with people who have similar characteristics). We find that risk aversion is affected by social conformity. Participants tend to become more (less) risk averse in the second experiment if the peers they discuss with are on average more (less) risk averse in the first experiment. This suggests that social interactions play a role in shaping risk preferences.

Suggested Citation

  • Steeve Marchand & Maria Adelaida Lopera, 2017. "Peer Effects and Risk-Taking Among Entrepreneurs: Lab-in-the-Field Evidence," Cahiers de recherche 1703, Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques.
    • Handle: RePEc:lvl:crrecr:1703
    as

    Download full text from publisher

    File URL: http://www.crrep.ca/sites/crrep.ca/files/fichier_publications/crrep-2017-03.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bramoulle, Yann & Galeotti, Andrea & Rogers, Brian (ed.), 2016. "The Oxford Handbook of the Economics of Networks," OUP Catalogue, Oxford University Press, number 9780199948277.
    2. Bellemare, Charles & Shearer, Bruce, 2010. "Sorting, incentives and risk preferences: Evidence from a field experiment," Economics Letters, Elsevier, vol. 108(3), pages 345-348, September.
    3. Bisin, Alberto & Horst, Ulrich & Ozgur, Onur, 2006. "Rational expectations equilibria of economies with local interactions," Journal of Economic Theory, Elsevier, vol. 127(1), pages 74-116, March.
    4. Brock, William A. & Durlauf, Steven N., 2001. "Interactions-based models," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 54, pages 3297-3380, Elsevier.
    5. Lisa Anderson & Jennifer Mellor, 2009. "Are risk preferences stable? Comparing an experimental measure with a validated survey-based measure," Journal of Risk and Uncertainty, Springer, vol. 39(2), pages 137-160, October.
    6. Paul Goldsmith-Pinkham & Guido W. Imbens, 2013. "Social Networks and the Identification of Peer Effects," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 31(3), pages 253-264, July.
    7. Mariassunta Giannetti & Andrei Simonov, 2009. "Social Interactions and Entrepreneurial Activity," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(3), pages 665-709, September.
    8. Yann Bramoullé & Andrea Galeotti & Brian Rogers, 2016. "The Oxford Handbook of the Economics of Networks," Post-Print hal-01447842, HAL.
    9. Kenneth R. Ahern & Ran Duchin & Tyler Shumway, 2014. "Peer Effects in Risk Aversion and Trust," The Review of Financial Studies, Society for Financial Studies, vol. 27(11), pages 3213-3240.
    10. William A. Brock & Steven N. Durlauf, 2001. "Discrete Choice with Social Interactions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(2), pages 235-260.
    11. Orazio Attanasio & Abigail Barr & Juan Camilo Cardenas & Garance Genicot & Costas Meghir, 2012. "Risk Pooling, Risk Preferences, and Social Networks," American Economic Journal: Applied Economics, American Economic Association, vol. 4(2), pages 134-167, April.
    12. Brachert, Matthias & Hyll, Walter, 2014. "On the Stability of Preferences: Repercussions of Entrepreneurship on Risk Attitudes," IWH Discussion Papers 5/2014, Halle Institute for Economic Research (IWH).
    13. Jana Cahlíková & Lubomír Cingl, 2017. "Risk preferences under acute stress," Experimental Economics, Springer;Economic Science Association, vol. 20(1), pages 209-236, March.
    14. Anna Conte & M. Vittoria Levati & Chiara Nardi, 2013. "The Role of Emotions on Risk Preferences: An Experimental Analysis," Jena Economics Research Papers 2013-046, Friedrich-Schiller-University Jena.
    15. Yann Bramoullé & Andrea Galeotti & Brian Rogers, 2016. "The Oxford Handbook of the Economics of Networks," Post-Print hal-03572533, HAL.
    16. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    17. Leonardo Bursztyn & Florian Ederer & Bruno Ferman & Noam Yuchtman, 2014. "Understanding Mechanisms Underlying Peer Effects: Evidence From a Field Experiment on Financial Decisions," Econometrica, Econometric Society, vol. 82(4), pages 1273-1301, July.
    18. Steffen Andersen & Glenn Harrison & Morten Lau & E. Rutström, 2009. "Elicitation using multiple price list formats," Experimental Economics, Springer;Economic Science Association, vol. 12(3), pages 365-366, September.
    19. Ekelund, Jesper & Johansson, Edvard & Jarvelin, Marjo-Riitta & Lichtermann, Dirk, 2005. "Self-employment and risk aversion--evidence from psychological test data," Labour Economics, Elsevier, vol. 12(5), pages 649-659, October.
    20. Caliendo, Marco & Fossen, Frank & Kritikos, Alexander, 2010. "The impact of risk attitudes on entrepreneurial survival," Journal of Economic Behavior & Organization, Elsevier, vol. 76(1), pages 45-63, October.
    21. Sarah Jacobson & Ragan Petrie, 2007. "Inconsistent Choices in Lottery Experiments: Evidence from Rwanda," Experimental Economics Center Working Paper Series 2007-03, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
    22. Alain Cohn & Jan Engelmann & Ernst Fehr & Michel André Maréchal, 2015. "Evidence for Countercyclical Risk Aversion: An Experiment with Financial Professionals," American Economic Review, American Economic Association, vol. 105(2), pages 860-885, February.
    23. A. Colin Cameron & Douglas L. Miller, 2015. "A Practitioner’s Guide to Cluster-Robust Inference," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 317-372.
    24. Dunn, Thomas & Holtz-Eakin, Douglas, 2000. "Financial Capital, Human Capital, and the Transition to Self-Employment: Evidence from Intergenerational Links," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 282-305, April.
    25. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2012. "The Intergenerational Transmission of Risk and Trust Attitudes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(2), pages 645-677.
    26. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2005. "A Smooth Model of Decision Making under Ambiguity," Econometrica, Econometric Society, vol. 73(6), pages 1849-1892, November.
    27. Boucher, Vincent, 2016. "Conformism and self-selection in social networks," Journal of Public Economics, Elsevier, vol. 136(C), pages 30-44.
    28. Cramer, J. S. & Hartog, J. & Jonker, N. & Van Praag, C. M., 2002. "Low risk aversion encourages the choice for entrepreneurship: an empirical test of a truism," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 29-36, May.
    29. Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(3), pages 531-542.
    30. Anna Conte & M. Vittoria Levati & Chiara Nardi, 2018. "Risk Preferences and the Role of Emotions," Economica, London School of Economics and Political Science, vol. 85(338), pages 305-328, April.
    31. Kelejian, Harry H. & Piras, Gianfranco, 2014. "Estimation of spatial models with endogenous weighting matrices, and an application to a demand model for cigarettes," Regional Science and Urban Economics, Elsevier, vol. 46(C), pages 140-149.
    32. Francesca Gioia, 2017. "Peer effects on risk behaviour: the importance of group identity," Experimental Economics, Springer;Economic Science Association, vol. 20(1), pages 100-129, March.
    33. Amrei Lahno & Marta Serra-Garcia, 2015. "Peer effects in risk taking: Envy or conformity?," Journal of Risk and Uncertainty, Springer, vol. 50(1), pages 73-95, February.
    34. Matthew J. Lindquist & Joeri Sol & Mirjam Van Praag, 2015. "Why Do Entrepreneurial Parents Have Entrepreneurial Children?," Journal of Labor Economics, University of Chicago Press, vol. 33(2), pages 269-296.
    35. Qu, Xi & Lee, Lung-fei, 2015. "Estimating a spatial autoregressive model with an endogenous spatial weight matrix," Journal of Econometrics, Elsevier, vol. 184(2), pages 209-232.
    36. Levon Barseghyan & Jeffrey Prince & Joshua C. Teitelbaum, 2011. "Are Risk Preferences Stable across Contexts? Evidence from Insurance Data," American Economic Review, American Economic Association, vol. 101(2), pages 591-631, April.
    37. Tiziano Arduini & Eleonora Patacchini & Edoardo Rainone, 2015. "Parametric and Semiparametric IV Estimation of Network Models with Selectivity," EIEF Working Papers Series 1509, Einaudi Institute for Economics and Finance (EIEF), revised Oct 2015.
    38. Ahn, Taehyun, 2010. "Attitudes toward risk and self-employment of young workers," Labour Economics, Elsevier, vol. 17(2), pages 434-442, April.
    39. Manel Baucells & Antonio Villasís, 2010. "Stability of risk preferences and the reflection effect of prospect theory," Theory and Decision, Springer, vol. 68(1), pages 193-211, February.
    40. Ramana Nanda & Jesper B. Sørensen, 2010. "Workplace Peers and Entrepreneurship," Management Science, INFORMS, vol. 56(7), pages 1116-1126, July.
    41. Yann Bramoullé & Bernard Fortin, 2010. "social networks: econometrics," The New Palgrave Dictionary of Economics,, Palgrave Macmillan.
    42. Rachel Croson & Uri Gneezy, 2009. "Gender Differences in Preferences," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 448-474, June.
    43. Chih‐Sheng Hsieh & Lung Fei Lee, 2016. "A Social Interactions Model with Endogenous Friendship Formation and Selectivity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(2), pages 301-319, March.
    44. Sarah Jacobson & Ragan Petrie, 2009. "Learning from mistakes: What do inconsistent choices over risk tell us?," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 143-158, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Celse, Jeremy & Karakostas, Alexandros & Zizzo, Daniel John, 2023. "Relative risk taking and social curiosity," Journal of Economic Behavior & Organization, Elsevier, vol. 210(C), pages 243-264.
    2. Vincent Boucher & Marion Gousse, 2019. "Wage Dynamics and Peer Referrals," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 1-23, January.
    3. Alexandros Karakostas & Giles Morgan & Daniel John Zizzo, 2023. "Socially interdependent risk taking," Theory and Decision, Springer, vol. 95(3), pages 365-378, October.
    4. Nikolaos Mylonidis & Lefkothea-Georgia Oikonomou, 2021. "Tracing the impact of peers on households’ economic behavior," Economic Change and Restructuring, Springer, vol. 54(3), pages 655-681, August.
    5. Jiang, Xuemei & Zhang, Xinyang & Xia, Yan, 2023. "Peer effect on low-carbon practices of firms along the value chain: Evidence from China," Energy Economics, Elsevier, vol. 127(PA).
    6. Zhu, Chen & Jin, Zhuo & Lee, Chien-Chiang, 2022. "The impact of informal care from children to their elderly parents on self-employment? Evidence from China," Economic Modelling, Elsevier, vol. 117(C).
    7. Byl, Jacob P. & Viscusi, W. Kip, 2021. "Experimental study of consumer responses to different sources of information about prescription drugs," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 754-771.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yann Bramoullé & Habiba Djebbari & Bernard Fortin, 2020. "Peer Effects in Networks: A Survey," Annual Review of Economics, Annual Reviews, vol. 12(1), pages 603-629, August.
    2. Guido M. Kuersteiner & Ingmar R. Prucha, 2020. "Dynamic Spatial Panel Models: Networks, Common Shocks, and Sequential Exogeneity," Econometrica, Econometric Society, vol. 88(5), pages 2109-2146, September.
    3. Beugnot, Julie & Fortin, Bernard & Lacroix, Guy & Villeval, Marie Claire, 2019. "Gender and peer effects on performance in social networks," European Economic Review, Elsevier, vol. 113(C), pages 207-224.
    4. Boucher, Vincent & Dedewanou, F. Antoine & Dufays, Arnaud, 2022. "Peer-induced beliefs regarding college participation," Economics of Education Review, Elsevier, vol. 90(C).
    5. Celse, Jeremy & Karakostas, Alexandros & Zizzo, Daniel John, 2023. "Relative risk taking and social curiosity," Journal of Economic Behavior & Organization, Elsevier, vol. 210(C), pages 243-264.
    6. Vincent Boucher & Marion Gousse, 2019. "Wage Dynamics and Peer Referrals," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 1-23, January.
    7. Rokhaya Dieye & Bernard Fortin, 2017. "Gender Peer Effects Heterogeneity in Obesity," Cahiers de recherche 1702, Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques.
    8. Vincent Boucher & Marion Gousse, 2019. "Wage Dynamics and Peer Referrals," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 1-23, January.
    9. Anwesha Bandyopadhyay & Lutfunnahar Begum & Philip J. Grossman, 2021. "Gender differences in the stability of risk attitudes," Journal of Risk and Uncertainty, Springer, vol. 63(2), pages 169-201, October.
    10. Timothy G. Conley & Nirav Mehta & Ralph Stinebrickner & Todd Stinebrickner, 2024. "Social Interactions, Mechanisms, and Equilibrium: Evidence from a Model of Study Time and Academic Achievement," Journal of Political Economy, University of Chicago Press, vol. 132(3), pages 824-866.
    11. Liza Charroin, 2018. "Homophily, peer effects and dishonesty," Post-Print halshs-01993618, HAL.
    12. Lucks, Konstantin E. & Lührmann, Melanie & Winter, Joachim, 2020. "Assortative matching and social interaction: A field experiment on adolescents’ risky choices," Journal of Economic Behavior & Organization, Elsevier, vol. 170(C), pages 313-340.
    13. Nadia Simoes & Nuno Crespo & Sandrina B. Moreira, 2016. "Individual Determinants Of Self-Employment Entry: What Do We Really Know?," Journal of Economic Surveys, Wiley Blackwell, vol. 30(4), pages 783-806, September.
    14. Timothy Conley & Nirav Mehta & Ralph Stinebrickner & Todd Stinebrickner, 2015. "Social Interactions, Mechanisms, and Equilibrium: Evidence from a Model of Study Time and Academic Achievement," NBER Working Papers 21418, National Bureau of Economic Research, Inc.
    15. Lönnqvist, Jan-Erik & Verkasalo, Markku & Walkowitz, Gari & Wichardt, Philipp C., 2015. "Measuring individual risk attitudes in the lab: Task or ask? An empirical comparison," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 254-266.
    16. Necker, Sarah & Voskort, Andrea, 2014. "Intergenerational transmission of risk attitudes – A revealed preference approach," European Economic Review, Elsevier, vol. 65(C), pages 66-89.
    17. Konstanting Lucks & Melanie Lührmann & Joachim K. Winter, 2017. "Peer effects in risky choices among adolescents," IFS Working Papers W17/16, Institute for Fiscal Studies.
    18. Ambler, Kate & Godlonton, Susan & Recalde, María P., 2021. "Follow the leader? A field experiment on social influence," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1280-1297.
    19. Arun Advani & Bansi Malde, 2018. "Credibly Identifying Social Effects: Accounting For Network Formation And Measurement Error," Journal of Economic Surveys, Wiley Blackwell, vol. 32(4), pages 1016-1044, September.
    20. Colasante, Annarita & Marini, Matteo M. & Russo, Alberto, 2017. "Incidental emotions and risk-taking: An experimental analysis," MPRA Paper 76992, University Library of Munich, Germany.

    More about this item

    Keywords

    preference; risk aversion; entrepreneur; social norms;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lvl:crrecr:1703. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Manuel Paradis (email available below). General contact details of provider: https://edirc.repec.org/data/crrepca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.