The role of the marginal rate of substitution of wealth for a loss averse investor

Jaroslava Hlouskova and Panagiotis Tsigaris ()

Economics Bulletin, 2016, vol. 36, issue 4, 2250-2260

Abstract: The marginal rate of substitution and the relative prices of goods have been used in economics to explain household's behavior but they have not been used yet in the behavioral economics literature. This note attempts to fill the gap in the literature with an application to a loss averse investor's demand for a risky asset in a one period model.

Keywords: Loss Aversion; Reference Level; Marginal Rate of Substitution; Market trade-off; Risky Asset (search for similar items in EconPapers)
JEL-codes: D1 G0 (search for similar items in EconPapers)
Date: 2016-11-27
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