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Myopic loss aversion and relative performance: an experimental study

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  • Dafna, Hofit Hamrani
  • Afik, Zvika
  • Lahav, Yaron

Abstract

We experimentally examine how Myopic Loss Aversion (MLA) is affected by relative performance incentives. Using a laboratory design that varies decision frequency and compensation scheme, we find that while MLA persists under competition, its effect is attenuated. This attenuation emerges primarily in later stages of the experiment and is driven mostly by male participants. We also show that higher cognitive ability is associated with greater risk-taking under relative performance, indicating that higher cognitive ability moderates—but does not eliminate—behavioral responses to competitive incentives. Our results highlight the role of competition, timing, and individual heterogeneity in shaping risk-taking under frequent evaluation.

Suggested Citation

  • Dafna, Hofit Hamrani & Afik, Zvika & Lahav, Yaron, 2026. "Myopic loss aversion and relative performance: an experimental study," Finance Research Letters, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:finlet:v:94:y:2026:i:c:s1544612326002163
    DOI: 10.1016/j.frl.2026.109685
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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General

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