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Previous Outcomes and Reference Dependence: A Meta Study of Repeated Investment Tasks with Restricted Feedback

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  • Hopfensitz, Astrid

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-lossaversion. 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 Toulouse School of Economics (TSE) in its series TSE Working Papers with number 09-087.

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Date of creation: 30 Sep 2009
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Handle: RePEc:tse:wpaper:22194

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Keywords: reference point; gamblers fallacy; meta study;

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Cited by:
  1. Hopfensitz, Astrid & Wranik, Tanja, 2009. "How to Adapt to Changing Markets: Experience and Personality in a Repeated Investment Game," TSE Working Papers 09-122, Toulouse School of Economics (TSE).

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