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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Find related papers by JEL classification:
- 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)
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.:
- Todd L. Cherry & Peter Frykblom & Jason F. Shogren, 2002.
"Hardnose the Dictator,"
American Economic Review, American Economic Association,
American Economic Association, vol. 92(4), pages 1218-1221, September.
- Todd L. Cherry & Peter Frykblom & Jason F. Shogren, 2002. "Hardnose the Dictator," Working Papers, Department of Economics, Appalachian State University 02-06, Department of Economics, Appalachian State University.
- Maribeth Coller & Melonie Williams, 1999. "Eliciting Individual Discount Rates," Experimental Economics, Springer, Springer, vol. 2(2), pages 107-127, December.
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