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Previous outcomes and reference dependence: A meta study of repeated investment tasks with and without restricted feedback

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Author Info
Hopfensitz, Astrid

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Abstract

When investment is repeated, previous outcomes (winning/losing) as well as the current budget level (gain/loss domain) influence decisions. The first is related to the so-called "gamblers fallacy". The second to value function relative to some reference point. Both effects have been extensively studied, however not their interaction. We present a meta-study of five experiments initially conducted to investigate myopic-loss-aversion. We observe that investment is related to the number of previous winning rounds as well as to the current budget position relative to a reference point. These effects persist when the analysis is extended to settings with restricted flexibility concerning investment.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16096.

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Date of creation: 25 Jun 2009
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Handle: RePEc:pra:mprapa:16096

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Related research
Keywords: reference point; gamblers fallacy; meta study; experiment; risk taking; myopic loss aversion;

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Find related papers by JEL classification:
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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    Other versions:
  3. Beattie, Jane & Loomes, Graham, 1997. "The Impact of Incentives upon Risky Choice Experiments," Journal of Risk and Uncertainty, Springer, vol. 14(2), pages 155-68, March. [Downloadable!] (restricted)
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  6. Hopfensitz, Astrid & Wranik, Tanja, 2008. "Psychological and environmental determinants of myopic loss aversion," MPRA Paper 9305, University Library of Munich, Germany. [Downloadable!]
  7. Read, Daniel & Loewenstein, George & Rabin, Matthew, 1999. "Choice Bracketing," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 171-97, December. [Downloadable!] (restricted)
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  13. Botond Kőszegi & Matthew Rabin, 2007. "Reference-Dependent Risk Attitudes," American Economic Review, American Economic Association, vol. 97(4), pages 1047-1073, September. [Downloadable!]
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  16. Gary Charness & Uri Gneezy, 2007. "Strong Evidence for Gender Differences in Investment," University of California at Santa Barbara, Economics Working Paper Series 24-07, Department of Economics, UC Santa Barbara. [Downloadable!]
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  20. Astrid Hopfensitz & Frans Winden, 2008. "Dynamic Choice, Independence and Emotions," Theory and Decision, Springer, vol. 64(2), pages 249-300, March. [Downloadable!] (restricted)
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