Advanced Search
MyIDEAS: Login to save this paper or follow this series

Anticipated and Experienced Emotions in an Investment Experiment

Contents:

Author Info

  • Ronald Bosman

    ()
    (University of Amsterdam)

  • Frans van Winden

    ()
    (University of Amsterdam)

Abstract

This paper experimentally investigates investment behavior.We find that global risk – i.e. risk independent of an agent’sinvestment decision (like political risk) – substantiallydecreases investment. Also effort to obtain the capital usedfor investment decreases investment substantially. Theseresults are neither in line with expected utility theory norwith psychologically orientated theories of decision makingunder risk (e.g. prospect theory or regret theory). We discussthe economic relevance of the results and offer anexplanation that takes the role of experienced emotions(measured with self-reports) and anticipated emotions intoaccount. In addition, an (alternative) emotion-basedexplanation is provided for related experimental findingsconcerning the common ratio effect.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://papers.tinbergen.nl/01058.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 01-058/1.

as in new window
Length:
Date of creation: 19 Jun 2001
Date of revision:
Handle: RePEc:dgr:uvatin:20010058

Contact details of provider:
Web page: http://www.tinbergen.nl

Related research

Keywords: investment; global risk; effort; emotions; common ratio effect;

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Andrew Caplin & John Leahy, 2001. "Psychological Expected Utility Theory And Anticipatory Feelings," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(1), pages 55-79, February.
  2. Camerer, Colin F & Hogarth, Robin M, 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Journal of Risk and Uncertainty, Springer, Springer, vol. 19(1-3), pages 7-42, December.
  3. Cubitt, Robin P & Starmer, Chris & Sugden, Robert, 1998. "Dynamic Choice and the Common Ratio Effect: An Experimental Investigation," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 108(450), pages 1362-80, September.
  4. Zeelenberg, Marcel & Beattie, Jane & van der Pligt, Joop & de Vries, Nanne K., 1996. "Consequences of Regret Aversion: Effects of Expected Feedback on Risky Decision Making," Organizational Behavior and Human Decision Processes, Elsevier, Elsevier, vol. 65(2), pages 148-158, February.
  5. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, Econometric Society, vol. 47(2), pages 263-91, March.
  6. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
  7. Bohn, Henning & Deacon, Robert, 1997. "Ownership Risk, Investment, and the Use of Natural Resources," Discussion Papers, Resources For the Future dp-97-20, Resources For the Future.
  8. Harless, David W & Camerer, Colin F, 1994. "The Predictive Utility of Generalized Expected Utility Theories," Econometrica, Econometric Society, Econometric Society, vol. 62(6), pages 1251-89, November.
  9. George Loewenstein, 2000. "Emotions in Economic Theory and Economic Behavior," American Economic Review, American Economic Association, vol. 90(2), pages 426-432, May.
  10. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
  11. George Wu, 1999. "Anxiety and Decision Making with Delayed Resolution of Uncertainty," Theory and Decision, Springer, Springer, vol. 46(2), pages 159-199, April.
  12. Wulf Albers & Robin Pope & Reinhard Selten & Bodo Vogt, 2000. "Experimental Evidence for Attractions to Chance," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 1(2), pages 113-130, 05.
  13. Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June.
  14. Hey, John D & Orme, Chris, 1994. "Investigating Generalizations of Expected Utility Theory Using Experimental Data," Econometrica, Econometric Society, Econometric Society, vol. 62(6), pages 1291-1326, November.
  15. Elster, Jon, 1996. "Rationality and the Emotions," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(438), pages 1386-97, September.
  16. Loewenstein, George, 1996. "Out of Control: Visceral Influences on Behavior," Organizational Behavior and Human Decision Processes, Elsevier, Elsevier, vol. 65(3), pages 272-292, March.
  17. Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, INFORMS, vol. 36(6), pages 643-660, June.
  18. Isen, Alice M. & Geva, Nehemia, 1987. "The influence of positive affect on acceptable level of risk: The person with a large canoe has a large worry," Organizational Behavior and Human Decision Processes, Elsevier, Elsevier, vol. 39(2), pages 145-154, April.
  19. Jon Elster, 1998. "Emotions and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 47-74, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Pavlo Blavatskyy, 2006. "Axiomatization of a Preference for Most Probable Winner," Theory and Decision, Springer, Springer, vol. 60(1), pages 17-33, 02.
  2. Pavlo R. Blavatskyy, . "Axiomatization of a Preference for Most Probable Winner," IEW - Working Papers 230, Institute for Empirical Research in Economics - University of Zurich.
  3. Bruno S. Frey, 2005. "Knight Fever: Towards an Economics of Awards," CREMA Working Paper Series 2005-12, Center for Research in Economics, Management and the Arts (CREMA).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:dgr:uvatin:20010058. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antoine Maartens (+31 626 - 160 892)).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.