Topic
Loss aversion
About: Loss aversion is a research topic. Over the lifetime, 2898 publications have been published within this topic receiving 115198 citations.
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TL;DR: In this paper, the authors disentangle the intertwined manipulation of feedback frequency and binding period, commonly used in previous research, to analyse how both variables alone contribute to the change in myopia.
Abstract: The feedback frequency and the length of commitment are two important features of investment alternatives in intertemporal decision-making. So far, empirical research has shown that a lower feedback frequency combined with a longer binding period decreases myopia and thereby increases the willingness to invest into a risky asset. Almost nothing is known, however, about the isolated effect of each variable and about a possible interaction of these variables. In an experimental study, we disentangle the intertwined manipulation of feedback frequency and binding period, commonly used in previous research, to analyse how both variables alone contribute to the change in myopia. We find a strong effect depending on the length of commitment, a much less pronounced effect of feedback and a strong interaction between both variables. The results have important implications for real world intertemporal decision-making. Keywords: Intertemporal decision-making, myopic loss aversion, feedback frequency, length of commitment, evaluation period
95 citations
TL;DR: It is shown that decision makers consider both G and MR and give greater weight to MR than G, indicating failure aversion in addition to loss aversion, and single reference point based models such as prospect theory cannot consistently account for these findings.
Abstract: The tri-reference point (TRP) theory takes into account minimum requirements (MR), the status quo (SQ), and goals (G) in decision making under risk. The 3 reference points demarcate risky outcomes and risk perception into 4 functional regions: success (expected value of x ≥ G), gain (SQ G > SQ. We present TRP assumptions and value functions and a mathematical formalization of the theory. We conducted empirical tests of crucial TRP predictions using both explicit and implicit reference points. We show that decision makers consider both G and MR and give greater weight to MR than G, indicating failure aversion (i.e., the disutility of a failure is greater than the utility of a success in the same task) in addition to loss aversion (i.e., the disutility of a loss is greater than the utility of the same amount of gain). Captured by a double-S shaped value function with 3 inflection points, risk preferences switched between risk seeking and risk aversion when the distribution of a gamble straddled a different reference point. The existence of MR (not G) significantly shifted choice preference toward risk aversion even when the outcome distribution of a gamble was well above the MR. Single reference point based models such as prospect theory cannot consistently account for these findings. The TRP theory provides simple guidelines for evaluating risky choices for individuals and organizational management. (PsycINFO Database Record (c) 2012 APA, all rights reserved). Language: en
95 citations
TL;DR: In this paper, the authors extend the standard newsvendor problem based upon risk neutrality to a game setting where multiple newsvendors with loss aversion preferences are competing for inventory from a risk-neutral supplier.
95 citations
TL;DR: In this article, a survey of farmers across Denmark (1053 responses) was conducted to assess how farmers perceive climate change, weigh its attendant risks, and envision the barriers to adaptation as these factors stand to affect their likelihood to undertake adaptive action.
93 citations
TL;DR: In this article, the authors disentangle the effect of information feedback from investment flexibility on the investment behavior of a myopically loss averse investor and show that varying the information condition alone suffices to induce behavior that is in line with the hypothesis of myopic loss aversion.
93 citations