Work

The effect of social comparison on debt taking: Experimental evidence

Year: 2025

Type: article

Abstract: A number of studies show a link between social comparison and high levels of household debt. However, the exact underlying mechanisms are not yet well understood. In this paper, we disentangle two mechanisms in a lab experiment to study the effects of social image concerns and peer information on debt-financed consumption choices. We find that having to announce their consumption decisions publicly does not make participants more likely to take on debt. However, in an exploratory analysis, we uncover that it makes them more likely to buy a lower quality product than they can afford. We find no significant effects for information about other participants consumption on choices.

Source: Journal of Behavioral and Experimental Finance

DOI: 10.1016/j.jbef.2025.101111

Authors: Antonia Grohmann, Melanie Koch

Institutions: Aarhus University, Danish Ministry of Finance, National Bank of Austria

Language: English

Topic: Financial Literacy, Pension, Retirement Analysis

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $4,290

Funders: Endocrine Society of Australia, Deutsche Forschungsgemeinschaft, Oesterreichische Nationalbank