COVID-19 Enhanced Diminishing Sensitivity in Prospect-Theory Risk Preferences: A Panel Analysis

Shinsuke Ikeda, Eiji Yamamura () and Yoshiro Tsutsui

Review of Behavioral Economics, 2023, vol. 10, issue 4, 287-313

Abstract: Based on unique panel data from a five-wave internet survey in Japan, we show how the coronavirus disease 2019 (COVID-19) pandemic affects people’s prospect-theory risk preferences, especially in the loss domain. The panel analysis indicates that following the spread of the pandemic, diminishing sensitivity becomes stronger for the participants’ value and probability weighting functions. Therefore, owing to the pandemic, (i) people become less sensitive to an increase in losses and feel less displeasure owing to losses, especially large ones, and (ii) they become more pessimistic toward losses occurring with tiny probabilities, and more optimistic toward losses with larger probabilities. One implication of the study is that people become less cautious about the risks of suffering large losses with non-tiny probabilities, which may slow down the recovery of society.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1561/105.00000178 (application/xml)

Related works:
Working Paper: COVID-19 Enhanced Diminishing Sensitivity in Prospect-Theory Risk Preferences: A Panel Analysis (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:now:jnlrbe:105.00000178

Access Statistics for this article

More articles in Review of Behavioral Economics from now publishers
Bibliographic data for series maintained by Lucy Wiseman ().