Skill, Effort, Luck : The Impact of Rankings on Risk-Taking in a Social Setting

Social comparisons and ranking in the wealth distribution impact risk-taking decisions. We provide experimental evidence that rankings have a differential impact on risk-taking decisions based on what individuals are ranked on. We observe the largest rank-based differences when individuals are ranked based on their effort or on skill. Compared to individuals who ranked first, individuals who ranked third in these settings increase their risk-taking by, on average, 17.39 pp. In luck-based rankings, this effect size amounts to only 11.34 pp