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Loss Aversion in the Laboratory

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Abstract

We report the results of a laboratory experiment testing for the existence of loss aversion in a standard risk aversion protocol (Holt and Laury, 2002). In our experiment, participants earn and retain money for a week before using it in an incentivized risk preference elicitation task. We find loss aversion, distinct from risk aversion, has a significant effect on behavior resulting in participants requiring higher compensation to bear risk.

Suggested Citation

  • Morrison, William G. and Robert Oxoby, 2014. "Loss Aversion in the Laboratory," LCERPA Working Papers 0073, Laurier Centre for Economic Research and Policy Analysis, revised 30 Jun 2014.
    • Handle: RePEc:wlu:lcerpa:0073
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    File URL: http://www.lcerpa.org/public/papers/LCERPA_2014_10_Morrison_Oxoby_Loss_Aversion.pdf
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    1. Loss Aversion in the Laboratory
      by Alessandro Cerboni in Knowledge Team on 2014-07-24 01:52:36

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    Cited by:

    1. John Griffin, 2015. "Risk Premia and Knightian Uncertainty in an Experimental Market Featuring a Long-Lived Asset," Fordham Economics Discussion Paper Series dp2015-01, Fordham University, Department of Economics.
    2. Laura Hueber & Rene Schwaiger, 2021. "Debiasing Through Experience Sampling: The Case of Myopic Loss Aversion," Working Papers 2021-01, Faculty of Economics and Statistics, Universität Innsbruck.

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    Keywords

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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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