Individual-level loss aversion in riskless and risky choices

Gächter, Simon; Johnson, Eric J.; Herrmann, Andreas

Abstract

Loss aversion can occur in riskless and risky choices. We present novel evidence on both in a non-student sample (660 randomly selected customers of a car manufacturer). We measure loss aversion in riskless choice in endowment effect experiments within and between subjects and find similar levels of average loss aversion in both. The subjects of the within study also participate in a simple lottery choice task which arguably measures loss aversion in risky choices. We find substantial heterogeneity in both measures of loss aversion. Loss aversion in riskless choice and loss aversion in risky choice are strongly positively correlated but on average riskless loss aversion is higher than risky loss aversion. We find that in both choice tasks loss aversion increases in age, income, and wealth, and decreases in education. Our results provide novel supportive input to the debate about the reality of loss aversion.

Citation

Gächter, S., Johnson, E. J., & Herrmann, A. (2022). Individual-level loss aversion in riskless and risky choices. Theory and Decision, 92(3-4), 599-624. https://doi.org/10.1007/s11238-021-09839-8

• Journal Article Type: Article
• Acceptance Date: Jul 23, 2021
• Online Publication Date: Aug 23, 2021
• Publication Date: Apr 1, 2022
• Deposit Date: Jul 26, 2021
• Publicly Available Date: Aug 24, 2022
• Journal: Theory and Decision
• Print ISSN: 0040-5833
• Electronic ISSN: 1573-7187
• Publisher: Springer Verlag
• Peer Reviewed: Peer Reviewed
• Volume: 92
• Issue: 3-4
• Pages: 599-624
• DOI: https://doi.org/10.1007/s11238-021-09839-8
• Keywords: Computer Science Applications; General Economics, Econometrics and Finance; General Social Sciences; Applied Psychology; Arts and Humanities (miscellaneous); Developmental and Educational Psychology; General Decision Sciences
• Public URL: https://nottingham-repository.worktribe.com/output/5833618
• Publisher URL: https://link.springer.com/article/10.1007/s11238-021-09839-8