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Loss Aversion? Not with Half-a-Million on the Table!


  • Pavlo Blavatskyy
  • Ganna Pogrebna


In the television show Affari Tuoi a contestant is endowed with a sealed box containing a monetary prize between one cent and half a million euros. In the course of the show the contestant is offered to exchange her box for another sealed box with the same distribution of possible monetary prizes inside. This offers a unique natural laboratory for testing the predictions of expected utility theory versus prospect theory using lotteries with large stakes. While expected utility theory predicts that an individual is exactly indifferent between accepting and rejecting the exchange offer, prospect theory predicts that an individual should always reject the exchange offer due to the assumption of loss aversion. We find that the assumption of loss aversion is violated by 46 percent of all contestants in our recorded sample. Thus, contestants do not appear to be predominantly loss averse when dealing with lotteries involving large stakes.

Suggested Citation

  • Pavlo Blavatskyy & Ganna Pogrebna, 2006. "Loss Aversion? Not with Half-a-Million on the Table!," IEW - Working Papers 274, Institute for Empirical Research in Economics - University of Zurich.
  • Handle: RePEc:zur:iewwpx:274

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    References listed on IDEAS

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    Cited by:

    1. Michał Krawczyk, 2012. "To answer or not to answer? A field test of loss aversion," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 29.
    2. Gee, C., 2007. "Risky Choice and Type-Uncertainty in "Deal or No Deal?"," Cambridge Working Papers in Economics 0758, Faculty of Economics, University of Cambridge.
    3. Robert Brooks & Robert Faff & Daniel Mulino & Richard Scheelings, 2009. "Deal or No Deal, That is the Question: The Impact of Increasing Stakes and Framing Effects on Decision-Making under Risk," International Review of Finance, International Review of Finance Ltd., vol. 9(1-2), pages 27-50.
    4. Pogrebna, Ganna, 2008. "Naive advice when half a million is at stake," Economics Letters, Elsevier, vol. 98(2), pages 148-154, February.

    More about this item


    loss aversion; expected utility theory; prospect theory; natural experiment;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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