Showing papers on "Loss aversion published in 2021"
TL;DR: In this article, the authors measured loss aversion in riskless choice in endowment effect experiments within and between subjects and found similar levels of average loss aversion for both riskless and risky choices.
Abstract: Loss aversion can occur in riskless and risky choices. We present novel evidence on both in a non-student sample (660 randomly selected customers of a car manufacturer). We measure loss aversion in riskless choice in endowment effect experiments within and between subjects and find similar levels of average loss aversion in both. The subjects of the within study also participate in a simple lottery choice task which arguably measures loss aversion in risky choices. We find substantial heterogeneity in both measures of loss aversion. Loss aversion in riskless choice and loss aversion in risky choice are strongly positively correlated, but on average riskless loss aversion is higher than risky loss aversion. We find that in both choice tasks, loss aversion increases in age, income, and wealth, and decreases in education. Our results provide novel supportive input to the debate about the reality of loss aversion.
60 citations
TL;DR: In this article, a large-scale experiment was conducted to test an early commitment of free tuition at a flagship university and the results suggest that uncertainty, present bias, and loss aversion loom large in students' college decisions.
Abstract: High-achieving, low-income students attend selective colleges at far lower rates than upper-income students with similar achievement. Behavioral biases, intensified by complexity and uncertainty in the admissions and aid process, may explain this gap. In a large-scale experiment we test an early commitment of free tuition at a flagship university. The intervention did not increase aid: rather, students were guaranteed before application the same grant aid that they would qualify for in expectation if admitted. The offer substantially increased application (68 percent versus 26 percent) and enrollment rates (27 percent versus 12 percent). The results suggest that uncertainty, present bias, and loss aversion loom large in students' college decisions.
53 citations
TL;DR: The proposed approach for modeling travel behavior under uncertainty coupling Cumulative Prospect Theory (CPT) with Multi-attribute Decision Making (MADM) theory outperforms conventional methods in terms of model performances and behavioral revelations and demonstrates that sensitivity to gains and losses in cost and travel time are divergent in mode shift behavior.
Abstract: This study proposes an approach for modeling travel behavior under uncertainty coupling Cumulative Prospect Theory (CPT) with Multi-attribute Decision Making (MADM) theory. CPT is utilized to depict travelers’ evaluations of each attribute, and MADM describes the process of making tradeoffs among multiple conflicting criteria. Divergent perception principles for different attributes are considered in the proposed framework. The proposed approach is utilized for an empirical analysis concerning mode shift behavior for commuting in Shanghai of China, based on data collected by stated preference surveys. Results show that the proposed approach outperforms conventional methods in terms of model performances and behavioral revelations. Empirical results demonstrate that sensitivity to gains and losses in cost and travel time are divergent in mode shift behavior. More importantly, it is found that travelers underestimate the occurrence chances of low-probability travel time and overestimate the occurrence changes of high-probability travel time in mode shift behavior, which is contrary to the findings from economics. Travelers show substantial loss aversion features as well. The heterogeneity in the value functions of CPT is investigated to shed light on differences in the evaluation process among individuals. Results reveal quite different empirical CPT parameters and behavioral mechanisms in mode shift behavior as compared to monetary experiments in economics. It highlights the importance of empirical estimations in various travel choice contexts to essentially understand travel behavior mechanisms, rather than arbitrary usage of findings from economics.
40 citations
TL;DR: In this article, a systematic review of the existing body of evidence on framing effects in pro-environmental decisions is provided, based on an analysis of 61 studies captured in 47 distinct papers.
39 citations
TL;DR: This work compares the effectiveness of loss and gain messages and finds no difference in the intention to comply with guidance or lockdown beliefs in students during COVID-19.
24 citations
TL;DR: In this article, the authors investigated the influence of eight behavioral biases: overconfidence and self-attribution, over-optimism, hindsight, representativeness, anchoring, loss aversion, mental accounting, and herding on the trading activity and recommendation intentions of millennials during the COVID-19 pandemic.
Abstract: Behavioral biases are known to influence the investment decisions of retail investors. Indeed, extant research has revealed interesting findings in this regard. However, the literature on the impact of these biases on millennials' trading activity, particularly during a health crisis like the COVID-19 pandemic, as well as the equity recommendation intentions of such investors, is limited. The present study addressed these gaps by investigating the influence of eight behavioral biases: overconfidence and self-attribution, over-optimism, hindsight, representativeness, anchoring, loss aversion, mental accounting, and herding on the trading activity and recommendation intentions of millennials during the pandemic. An artificial neural network approach was used to analyze the data collected from 351 millennial men in Finland. The results revealed that herding, hindsight, overconfidence and self-attribution, representativeness, and anchoring influence both trading activity and recommendation intentions, albeit to varying extents. Notably, loss aversion and mental accounting influence only the recommendation intentions. Furthermore, the relationship of the two endogenous variables is nonlinear with herding, representativeness, and anchoring but is linear with other biases. In addition to the quantitative study, we also conducted a post hoc qualitative study with 19 millennials to evaluate the persistence of behavioral biases among them through the pandemic. (PsycInfo Database Record (c) 2021 APA, all rights reserved)
22 citations
TL;DR: To alleviate consumer loss aversion (CLA), firms can disclose information to reduce consumers’ unceramic loss aversion.
Abstract: Consumers experience a sense of loss when a product’s quality does not match their expectations. To alleviate consumer loss aversion (CLA), firms can disclose information to reduce consumers’ uncer...
17 citations
01 Jan 2021
TL;DR: In this paper, the authors used a qualitative method by using semi-structured interview (virtual and physical) and all fifteen interviewers were based in the United Arab Emirates to identify the effects of behavioral/psychological factors i.e. overconfidence, anchoring bias, loss aversion, herding effect on financial decision making, in both normal situation (NS) and COVID-19 pandemic uncertain situation (CVD-19) separately.
Abstract: The purpose of the study is to identify the effects of behavioral/psychological factors i.e. overconfidence, anchoring bias, loss aversion, herding effect on financial decision making, in both normal situation (NS) and COVID-19 pandemic uncertain situation (CVD-19) separately. This paper used a qualitative method by using semi-structured interview (virtual and physical) and all fifteen interviewers were based in the United Arab Emirates. Whereas, the results of the study show that in NS all the factors have a positive significant relationship with financial decision-making. But on the other hand, in the CVD-19 uncertain situation, majority of the factors has a negative effect on financial decision making, except for overconfidence, which shows positive effect. Though the limitation was a time constraint, limited factors, and CVD-19 itself is a stressful environment and people do not prefer to participate in interviews. Finally, the future research direction is to increase sample size and factors to understand the financial decision impact on performance.
16 citations
TL;DR: This article examined the validity of the two main assumptions of relative risk-aversion models of educational inequality and compared the Breen-Goldthorpe (BG) and BreenYaish (BY) models in terms of educational inequalities.
Abstract: This work examines the validity of the two main assumptions of relative risk-aversion models of educational inequality. We compare the Breen-Goldthorpe (BG) and the Breen-Yaish (BY) models in terms...
16 citations
TL;DR: The authors showed that cognitive abilities are negatively associated with noisy, inconsistent choices and this effect may make higher ability individuals appear to be less risk averse and more loss averse, and that errors are more likely to appear when the two payoffs in a given decision exhibit similar probability.
15 citations
TL;DR: In this article, the authors explore how farmer risk preferences are related to their perception of risk of climate change and find that farmers that behave in accordance with the assumptions of Prospect Theory are more likely to perceive greater risks of climate changes.
TL;DR: In this article, the myopic loss aversion (MLA) perspective is applied to the transgenerational leadership transition of a family firm, and the authors argue that outgoing leade...
Abstract: A transgenerational leadership transition is one of the most critical events in the life cycle of family firms. Drawing upon the myopic loss aversion (MLA) perspective, we argue that outgoing leade...
TL;DR: This article conducted a large-scale interdisciplinary meta-analysis to systematically accumulate knowledge from numerous empirical estimates of the loss aversion coefficient reported during the past couple of decades, concluding that the mean loss aversion is between 1.8 and 2.1.
Abstract: Loss aversion is one of the most widely used concepts in behavioral economics. We conduct a large-scale interdisciplinary meta-analysis, to systematically accumulate knowledge from numerous empirical estimates of the loss aversion coefficient reported during the past couple of decades. We examine 607 empirical estimates of loss aversion from 150 articles in economics, psychology, neuroscience, and several other disciplines. Our analysis indicates that the mean loss aversion coefficient is between 1.8 and 2.1. We also document how reported estimates vary depending on the observable characteristics of the study design.
TL;DR: The authors found that people tend to hold lay theories that gambling is more likely to cause losses and less likely to bring gains compared to investment, and they observed a stronger loss aversion when the same monetary decision was framed as gambling rather than as an investment.
TL;DR: The proposed method can be used to deal with some practical group decision making (e.g., the engineering bid and the urban ecological park location), where the individuals will have no conflicts of interests.
TL;DR: A supply chain model with a risk-averse retailer and a supplier offering loss sharing and trade credit in a supplier-Stackelberg game where the decision variables are the optimal order quantity and loss sharing ratio is presented.
TL;DR: This work analyzes the bidding behavior of expectations-based loss-averse bidders in auctions with interdependent values to emphasize the difference between the risk b biders face over whether they win the auction.
Abstract: We analyze the bidding behavior of expectations-based loss-averse bidders in auctions with interdependent values. We emphasize the difference between the risk bidders face over whether they win the...
TL;DR: The relationship between alternative risk criteria is case-sensitive and should be evaluated more carefully, as it is found that the risk aversion models are essentially equivalent in inducing the same set of optimal solutions under adverse market states.
TL;DR: The authors examined how meso-level organizational decisions impact managers' individual risk-assessments of sustainability initiatives and found that local governments engage in risk-seeking behavior in order to minimize their potential for losses of prior effort.
Abstract:
A normative assumption of government reform efforts such as New Public Management is that fostering a more innovative, proactive, and risk-taking organizational culture—developing what has been described as an “entrepreneurial orientation” (EO)—improves performance. But in arenas like urban sustainability, performance can be an ambiguous, multifaceted concept. Managers’ assessments of their own nimbleness, innovative thinking, and risk culture are also likely to influence how they interpret the risk-reward balance of opportunities to enhance organizational performance. This study examines how meso-level organizational decisions impact managers’ individual risk-assessments of sustainability initiatives. We do so through a combination of Bayesian structural equation modeling of US local government survey data collected over two time periods, and an artifactual survey experiment with empaneled local government employees. This multimethod design allows us to examine the role of organizational performance and EO—meso-level learning heuristics—in shaping the micro-foundations of managerial risk assessment. The organization-level observational results indicate that local governments engage in risk-seeking behavior in order to minimize their potential for losses of prior effort. Experimental results confirm local government administrators are loss-averse when asked to evaluate the merits of initiating a hypothetical sustainability program.
TL;DR: It is shown that even with independent private values the Vickrey auction yields strictly higher revenue than the English auction, violating the well known revenue equivalence.
TL;DR: In this article, a loss-averse retailer facing stochastic demand orders products from a risk-neutral supplier subject to yield uncertainty, where marketing effort exerted by the retailer is employed to enhance the final market demand.
Abstract: This paper deals with a one-period two-stage supply chain, in which a loss-averse retailer facing stochastic demand orders products from a risk-neutral supplier subject to yield uncertainty Marketing effort exerted by the retailer is employed to enhance the final market demand We first establish a performance benchmark, and show that the wholesale price contract fails to coordinate the supply chain due to the effects of double marginalization and loss aversion Then we propose a revenue-cost-sharing contract in order to achieve supply chain coordination It is verified that a properly designed revenue-cost-sharing contract can achieve perfect coordination and a win-win outcome synchronously Our results reveal that it is simple to implement and arbitrarily allocate the total channel profit between the retailer and the supplier In addition, we examine the effect of the retailer's loss aversion degree on contract parameters and profit allocation, and we show that both the retailer and the supplier can benefit from marketing effort
TL;DR: Wang et al. as mentioned in this paper used Stackelberg game and Rubinstein alternating offers bargaining game, and built a dual-channel reverse supply chain model under the influence of loss aversion of recyclers and bargaining power of consumers.
Abstract: The issue of e-waste recycling is imminent. With the continuous enhancement of Internet technology and people's awareness of sustainable development, the dual-channel reverse supply chain management combining online and offline becomes particularly important. In order to promote the sustainable development of dual-channel reverse supply chain recycling, this paper uses Stackelberg game and Rubinstein alternating offers bargaining game, and builds a dual-channel reverse supply chain model under the influence of loss aversion of recyclers and bargaining power of consumers. The purpose of this paper is to explore the recycling pricing decision of dual-channel reverse supply chain under the dual impact of loss aversion of recyclers and bargaining power of consumers. The results show that the increase in loss aversion of recyclers makes the recycling price of dual-channel recyclers decrease, but it increases their profits; the enhanced bargaining power of consumers raises the recycling price of products and increases the profits of members; the competition of recycling channels helps to improve the recycling price and profit of each member of the reverse supply chain. The results of this study provide theoretical basis for the members of dual-channel reverse supply chain to make optimal decisions in the case of bounded rationality, thereby promoting the sustainable development of reverse supply chain.
TL;DR: In this paper, the authors analyze farmers' preferences for stable, increasing or decreasing payments through a choice experiment (CE) survey of 123 French farmers, about 15% of those contacted.
TL;DR: The moderating effect of pleasure-seeking and loss aversion was investigated in relation to the big five personality traits with regard to risky investment intentions and general risk aversion and risky investment intention were investigated simultaneously to explain the different findings in the literature.
Abstract: The aim of this study, the moderating effect of pleasure-seeking and loss aversion, was investigated in relation to the big five personality traits with regard to risky investment intentions,In the study, the data was obtained between January and November 2019 via an online survey with convenience sampling The total number of subjects is 886 The authors used IBM SPSS Statistics for analysis Exploratory factor analysis, correlation analysis, regression analysis and discriminant analysis were performed,Significant relationships were found between five personality traits and risky investment intentions In these relationships, the moderator effect of pleasure-seeking for extraversion, conscientiousness and neuroticism personality traits was also determined Besides, investment preferences for choosing “unknown and new investment” against “known and experienced investment”, which is a typical feature of the balloon periods, were modeled with big five personality traits and motivation variables (pleasure-seeking and loss aversion) and the equation was formed As a result, high accuracy classification success was obtained,The study is unique owing to its findings In addition, general risk aversion and risky investment intention were investigated simultaneously to explain the different findings in the literature regarding the attitude of big five personality traits to risk and personality traits that show consistent approach were identified
TL;DR: In this article, a functional relationship between irrational behavior, which proxied by loss aversion, the endowment effect, and herd behavior toward the morality of economic among small and medium enterprises (SMEs), as well as the mediating role of altruism in the perspectives of behavioral economics was explored.
TL;DR: Using prospect theory and game theory, and considering consumers' loss aversion, the authors studies the pricing strategy of advance selling in a supply chain consisting of a manufacturer and an e-retailer under a resale contract or an agency contract.
Abstract:
Advance selling activities are becoming more popular, especially in online retailing of new products. During the advance selling process, consumers may be loss averse. This influences the pricing strategy of the members of the supply chain. Using prospect theory and game theory, and considering consumers’ loss aversion, this paper studies the pricing strategy of advance selling in a supply chain consisting of a manufacturer and an e-retailer under a resale contract or an agency contract. The study finds that as consumers’ loss aversion increases, supply chain members set lower prices. Consumers’ loss aversion has a positive impact on the member who directly prices to consumers, but it has a negative impact on the indirect member. Advance selling under an agency contract makes it easier to achieve a Pareto improvement than that under the resale contract. When the unit order fulfilment cost is low, the e-retailer prefers the agency contract.
TL;DR: In this article, the optimal decisions of both the supplier and the capital constrained retailer being loss aversion decision makers under different financing strategies were investigated, and the Stackelberg equilibrium was solved under two financing schemes.
Abstract: In real-world transactions, capital constraints restrict the rapid development of the enterprises in the supply chain. The loss aversion behaviors of enterprises directly affect the decision making. This paper investigates the optimal decisions of both the supplier and the capital constrained retailer being loss aversion decision makers under different financing strategies. The capital constrained retailer may borrow from a bank or use the supplier's trade credit to satisfy uncertain demand. With a wholesale price contract, we analytically solve the unique Stackelberg equilibrium under two financing schemes. We derive the critical wholesale price that determines the retailer's financing preference. We identify the impacts of the loss aversion coefficients and initial capital level on the operational and financing decisions. Numerical examples reveal that there exists a Pareto improvement zone regarding the retailer's loss aversion coefficient and initial capital level.
TL;DR: In this article, the authors examine the quality of decisions in general, and specifically the conditions under which it deteriorates, and present a set of conditions for the conditions of poor decision-making.
Abstract: When organizational tasks require accurate decision-making, it is of interest to examine the quality of decisions in general, and specifically the conditions under which it deteriorates. Many impor...
TL;DR: The authors found that loss aversion, represented by higher income that translates to greater potential pain caused by losing things to be the most significant demographic factor behind 2FA adoption and the older generation to be among the most vulnerable groups when it comes to authentication-based cyber threats.