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Loss Averse Behavior

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  • Peter Brooks
  • Horst Zank

Abstract

A behavioral condition of loss aversion is proposed and tested. Forty-nine students participated in experiments on binary choices among lotteries involving small scale real gains and losses. At the aggregate level, a significant proportion of the choices are in the direction predicted by loss aversion. Individuals can be classified as loss averse (28 participants), gain seeking (12), and unclassified (9). A comparison with risk behavior for binary choices on lotteries involving only gains shows that risk attitudes vary across these domains of lotteries. A gender effect is also observed: proportionally more women are loss averse. In contrast to the predictions of comonotonic independence, the size of common outcomes has systematic influence on choice behavior. Copyright Springer Science + Business Media, Inc. 2005

Suggested Citation

  • Peter Brooks & Horst Zank, 2005. "Loss Averse Behavior," Journal of Risk and Uncertainty, Springer, vol. 31(3), pages 301-325, December.
    • Handle: RePEc:kap:jrisku:v:31:y:2005:i:3:p:301-325
    DOI: 10.1007/s11166-005-5105-7
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