INDIVIDUAL-LEVEL LOSS AVERSION IN RISKLESS AND RISKY CHOICES

Simon Gaechter (), Eric Johnson () and Andreas Herrmann ()
Additional contact information
Simon Gaechter: University of Nottingham
Eric Johnson: Columbia University
Andreas Herrmann: University of St Gallen
Authors registered in the RePEc Author Service: Simon Gächter

No 2007-02, Discussion Papers from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham

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: Loss aversion; endowment effect; field experiments (search for similar items in EconPapers)
JEL-codes: C91 C93 D81 (search for similar items in EconPapers)
Date: 2007-07
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Citations: View citations in EconPapers (120)

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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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