Expectation-Based Loss Aversion and Strategic Interaction

Simon Dato, Andreas Grunewald and Daniel Müller

No 02/2015, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

Abstract: This paper provides a comprehensive analysis regarding strategic interaction under expectation-based loss-aversion. First, we develop a coherent framework for the analysis by extending the equilibrium concepts of Koszegi and Rabin (2006, 2007) to strategic interaction and demonstrate how to derive equilibria. Second, we delineate how expectation-based loss-averse players differ in their strategic behavior from their counterparts with standard expected-utility preferences. Third, we analyze equilibrium play under expectation-based loss aversion and comment on the existence of equilibria.

Keywords: Non-Cooperative Games; Expectation-Based Loss Aversion; Reference-Dependent (search for similar items in EconPapers)
JEL-codes: C72 D01 D03 D81 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bonedp:022015

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