published in: Canadian Journal of Economics, 2022, 55 (3), 1460 - 1479
We report on a laboratory experiment testing for the presence of loss aversion, as separate from risk aversion, utilizing an asset integration protocol designed to ensure that a loss of cash provided by the experimenter is viewed as a real loss by experimental participants. Our experimental design augments the Holt-Laury risk preference elicitation methodology to assess how individuals choose between a safe option and a riskier lottery. When the money at stake is viewed as the individual's own money, one of the lottery outcomes is in the domain of losses. Our results confirm that individuals display an additional reluctance to participate in a mixed domain lottery beyond that predicted by risk aversion. We show that only preference functions incorporating loss aversion are able to generate predicted behaviour that matches our results.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.