Investment in education under disappointment aversion

Dan Anderberg and Claudia Cerrone

Economics Bulletin, 2017, vol. 37, issue 3, 1533-1540

Abstract: This paper develops a model of risky investment in education under disappointment aversion, modelled as loss aversion around one's endogenous expectation. The model shows that disappointment aversion reduces investments in education for lower ability people and increases investments for higher ability people, thereby magnifying the gap between them generated by the riskiness of education.

Keywords: education; risk; disappointment aversion; endogeneous reference points. (search for similar items in EconPapers)
JEL-codes: D1 I2 (search for similar items in EconPapers)
Date: 2017-07-02
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Related works:
Working Paper: Investment in education under disappointment aversion (2016)
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