Loneliness Leads to Risky Financial Decisions
Loneliness makes people make riskier financial decisions, according to a new study.
A new study presented at the American Psychological Association's 121st Annual Convention reveals that people who feel isolated are more inclined to make riskier financial decisions for bigger payoffs.
In several experiments and surveys, lonely people consistently chose the longer odds for bigger lottery payoffs, took greater risks with their finances and bet on horse races and gambled in casinos.
"In the absence of social support, forlorn consumers apparently place more value on the power of money to secure what they want socially," Rod Duclos, PhD, assistant professor of marketing at the Hong Kong University of Science and Technology, said in a statement.
In one experiment, 59 participants played an online ball-tossing game designed to make them feel socially included or excluded. Afterwards, when participants were asked to chose between two hypothetical gambles, excluded participants favored the riskier option more strongly than their included counterparts.
In another experiment that used essay writing to make 168 students feel either excluded or included revealed that socially excluded participants were twice as likely to gamble as the students who felt included. However, researchers found that those who felt isolated did not take more risks than other if they were told that having more money would no longer result in social benefits.
Researchers also conducted real world experiments. They interviewed individuals at malls, parks and subway stations and asked respondents to choose between two lotteries. The first lottery offered an 80 percent chance to win $200 and a 20 percent chance to win nothing and the second lottery offered a 20 percent chance to win $800 and 80 percent chance to win nothing. The participants were then asked what proportion of their disposable income they had in low versus high-risk investments, how often they bet on horse racing, how often they gambled in casinos, and how often on a scale of 1-4 (1 = never, 4 = often) they felt socially excluded.
Researchers found that people who often felt socially excluded were significantly more likely to make riskier decisions.
"Some marketers with questionable ethics may target demographic groups likely to suffer from social exclusion, such as the elderly, divorcees, and widows or widowers," Duclos said.
"Others may be tempted to isolate, physically or psychologically, prospective clients during financial negotiations since doing so may result in larger commissions. By illustrating how common experiences such as feeling rejected or accepted can affect consumers' financial decisions, our research can help people make more informed decisions," he concluded.