Presentation Title: Effects of Social Exclusion on Financial Risk Taking

Abstract: Connecting with others is a fundamental need of human beings. To this end, people devote important resources such as time and money to initiate and maintain social relationships (Duclos et al. 2012). What happens, however, when these efforts are thwarted? Feeling alone or rejected is after all quite common. Romantic relationships dissolve, people are ignored at parties or in office conversations, and offers of friendship are frequently rebuffed. This work examines the effects of social exclusion on financial risk-taking.

In eight experiments and field surveys that used a variety of procedures to manipulate social exclusion (e.g., cyberball, essay-writing tasks) and a variety of measures to capture financial risk-taking, we find consistently that feeling isolated or ostracized causes consumers to pursue riskier but potentially more profitable financial opportunities. Importantly, these daring proclivities do not appear driven by impaired affect or self-esteem. Rather, interpersonal rejection exacerbates financial risk-taking by heightening the instrumentality of money (as a substitute for popularity) to obtain benefits in life. In absence of social support, forlorn consumers value more acutely the power of money to secure what they want out of the social system. The quest for wealth that ensues adopts a riskier but potentially more lucrative road.

The realm of behaviors that necessitate balancing between risk and financial reward (e.g., saving to fund college education or retirement, deciding how to pay for health care and insurance, investing in the stock market) is vast and few would deny the importance of financial (mis)management for personal and societal welfare. By illustrating the impact that common experiences such as feeling rejected or accepted can have on consumers’ financial decisions, our findings contribute new insights for policy makers, financial-services providers, and consumers. For instance, government agencies and consumer advocates might want to investigate (and possibly regulate) some of the sales practices in the financial-services industry (e.g., lenders, brokers). Given the consequences of social exclusion for risk-taking, some marketers with questionable ethics may indeed be tempted to isolate (either physically or psychologically) prospective clients during the negotiation process if doing so confers them larger commissions. Others may opt to target demographic groups likely to suffer from social isolation (e.g., the elderly, divorcees, widow(er)s). As such, consumers would benefit from being aware of the tricks available to unscrupulous financial-services providers.

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