Journal
JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION
Volume 188, Issue -, Pages 439-457Publisher
ELSEVIER
DOI: 10.1016/j.jebo.2021.05.030
Keywords
Decision-making; Adolescence; Observation; Loss aversion; Risk tolerance
Categories
Funding
- Australian Research Council [DE150101032]
- Australian Research Council center of Excellence for Children and Families over the Life Course [CE140100027]
- Australian Research Council [DE150101032] Funding Source: Australian Research Council
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Adolescents tend to make more welfare-decreasing decisions in the presence of peers, leading to substantial losses in terms of lives, injury, and missed opportunities. When observed by peers, 18-24-year-old adolescents become more risk-tolerant in gains and losses but more loss averse.
Relative to adults, adolescents make more welfare-decreasing decisions, especially in the presence of peers. The consequences of these decisions result in substantial individual and societal losses in terms of lives lost, injury, hospitalization costs, and foregone opportunities. In this paper, we use laboratory within-subject and between-subject experiments with younger (12-17 years old) and older (18-24 years old) adolescents to identify which economic preference is affected by peer observation in adolescence - risk tolerance in gains, risk tolerance in losses, and/or loss aversion. We find that in our study, while observed by peers, 18-24-year-old adolescents became more risk-tolerant both in gains and in losses but more loss averse. We discuss the potential mechanisms driving the result and its policy implications. (c) 2021 Elsevier B.V. All rights reserved.
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