Individual-Level Loss Aversion in Riskless and Risky Choices

Simon Gächter, Eric J. Johnson () and Andreas Herrmann ()
Additional contact information
Eric J. Johnson: Columbia University
Andreas Herrmann: University of St. Gallen

No 2961, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Loss aversion can occur in riskless and risky choices. Yet, there is no evidence whether people who are loss averse in riskless choices are also loss averse in risky choices. We measure individual-level loss aversion in riskless choices in an endowment effect experiment by eliciting both WTA and WTP from each of our 360 subjects (randomly selected customers of a car manufacturer). All subjects 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 the riskless choice task and loss aversion in the risky choice task are highly significantly and strongly positively correlated. We find that in both choice tasks loss aversion increases in age, income, and wealth, and decreases in education.

Keywords: field experiments; endowment effect; loss aversion (search for similar items in EconPapers)
JEL-codes: C91 C93 D81 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2007-07
New Economics Papers: this item is included in nep-cbe, nep-cdm, nep-exp and nep-upt
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Citations: View citations in EconPapers (119)

Published - revised verson published in: Theory and Decision, 2022, 92, 599–624. [Online]

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Related works:
Journal Article: Individual-level loss aversion in riskless and risky choices (2022)
Working Paper: Individual-level loss aversion in riskless and risky choices (2010)
Working Paper: INDIVIDUAL-LEVEL LOSS AVERSION IN RISKLESS AND RISKY CHOICES (2007)
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