Loss Aversion and Intertemporal Choice: A Laboratory Investigation
AbstractWe present results from a laboratory study of loss aversion in the context of intertemporal choice. We investigate whether the provision of (windfall) endowments results in different elicited discount rates relative to subjects who earn income or earn and retain the income for a period before making intertemporal decisions. We hypothesize that loss aversion in an intertemporal choice yields higher discount rates among subjects earning and retaining. Our results support this hypothesis: among subjects who earn and retain their income we elicit substantially higher discount rates relative to those experiencing a windfall gain.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4854.
Length: 14 pages
Date of creation: Mar 2010
Date of revision:
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Other versions of this item:
- Robert Oxoby & William G. Morrison, 2010. "Loss Aversion and Intertemporal Choice: A Laboratory Investigation," Working Papers 2010-06, Department of Economics, University of Calgary, revised 26 Jan 2010.
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-17 (All new papers)
- NEP-CBE-2010-04-17 (Cognitive & Behavioural Economics)
- NEP-EXP-2010-04-17 (Experimental Economics)
- NEP-UPT-2010-04-17 (Utility Models & Prospect Theory)
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- Todd L. Cherry & Peter Frykblom & Jason F. Shogren, 2002.
"Hardnose the Dictator,"
American Economic Review,
American Economic Association, vol. 92(4), pages 1218-1221, September.
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