‘Relative Social Standing’: Reference Group Effect on Wealth Accumulation – An Experimental Approach
Abstract
This study intends to find the effect of reference group influence on wealth accumulation using a lab experiment. Specifically, it seeks to find the link between the scores of the participants in the experiment and the effect of comparison with their chosen referents. The effect of comparison with reference group that contributes to wealth accumulation is termed ‘Relative Social Standing’. 220 university students were recruited and assigned randomly to treatment or control group. A game is used as the activity to produce a measurable outcome which is the number of coins obtained. The treatment group was allowed to view the scores of coins obtained by their referents before the game while the control group did not view any score of others. The difference of outcome between these two groups are attributed to the intervention of viewing others’ scores which creates the effect of comparison. The total amount of coins accumulated in the experiment represents wealth accumulation. The findings showed that the effect of intervention is statistically significant, and there is a negative correlation between the change in score and the effect of comparison. This study gauged the effect of reference group using an experimental approach instead of conventional self-reporting questionnaires.
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