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A Structural Analysis of Disappointment Aversion in a Real Effort Competition

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  • David Gill

    ()
    (University of Southampton)

  • Victoria Prowse

    ()
    (University of Oxford)

Abstract

We develop a novel computerized real effort task, based on moving sliders across a screen, to test experimentally whether agents are disappointment averse when they compete in a real effort sequential-move tournament. We predict that a disappointment averse agent, who is loss averse around her endogenous choice-acclimating expectations-based reference point, responds negatively to her rival's effort. We find significant evidence for this discouragement effect, and use the Method of Simulated Moments to estimate the strength of disappointment aversion on average and the heterogeneity in disappointment aversion across the population.

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File URL: http://cess-wb.nuff.ox.ac.uk/documents/DP2011/CESS_DP2011_001.pdf
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Bibliographic Info

Paper provided by University of Oxford, Nuffield College in its series Discussion Papers with number 2011001.

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Length: 40 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:cex:dpaper:2011001

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Related research

Keywords: Disappointment aversion; Loss aversion; Reference-dependent preferences; Reference point adjustment; Expectations; Tournament; Real effort experiment; Slider task;

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