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Risk Taking, Intertemporal Choice, and Loss Aversion

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We report on two laboratory experiments testing for the presence of loss aversion, separate from risk aversion, in decisions involving risk and intertemporal choice. Both experiments utilize an asset legitimacy protocol to control for ‘house money’ effects. In our first experiment, we augment the Holt-Laury risk preference elicitation protocol to address the effects of loss aversion. In our second experiment, we explore loss aversion using a discount rate elicitation protocol that controls for risk preferences. Our results show that loss aversion can be separated from risk preferences and has a profound effect in decision-making.

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  • William Morrison, Robert Oxoby, 2016. "Risk Taking, Intertemporal Choice, and Loss Aversion," LCERPA Working Papers 0096, Laurier Centre for Economic Research and Policy Analysis, revised 01 Jul 2016.
  • Handle: RePEc:wlu:lcerpa:0096
    Note: LCERPA Working Paper No. 2016-1
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    File URL: http://www.lcerpa.org/public/papers/LCERPA_2016_1.pdf
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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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