“At least I didn’t lose money” - Nominal Loss Aversion Shapes Evaluations of Housing Transactions

Thomas A. Stephens and Jean-Robert Tyran
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Thomas A. Stephens: University of Vienna, Department of Economics

No 12-14, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: Loss aversion is one of the most robust findings to have emerged from behavioral economics. Surprisingly little attention, however, has been devoted to nominal loss aversion, the interaction of loss aversion and money illusion. People tend to think of transactions in terms of their nominal (monetary) values. Real losses may therefore loom larger in people’s minds when they lose money than when real losses are hidden by purely nominal gains. Using a survey experiment with a large and heterogeneous sample, we show that evaluations of housing transactions are systematically biased by purely nominal gains versus losses.

Keywords: loss aversion; money illusion; bounded rationality; cognitive reflection; cognitive ability; survey experiment (search for similar items in EconPapers)
JEL-codes: A10 C91 D00 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012-10-12
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp, nep-upt and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: ?At least I didn?t lose money? Nominal Loss Aversion Shapes Evaluations of Housing Transactions (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:1214

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