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Experimental studies of the WTP-WTA gap avoid social trading by implementing an incentive compatible mechanism for each individual trader. We compare a traditional random price mechanism and a novel elicitation mechanism preserving social trading, without sacrificing mutual incentive...
Persistent link: https://www.econbiz.de/10010252391
This paper develops a model of risky investment in education under disappointment aversion, modelled as loss aversion around one's endogenous expectation. The model shows that disappointment aversion reduces the optimal investment in education for lower ability people and increases it for higher...
Persistent link: https://www.econbiz.de/10011569052
The prospect theory is one of the most popular decision-making theories. It is based on the S-shaped utility function, unlike the von Neumann and Morgenstern (NM) theory, which is based on the concave utility function. The S-shape brings in mathematical challenges: simple extensions and...
Persistent link: https://www.econbiz.de/10003980000
This paper extends decision making under risk and uncertainty to group theory via representations of invariant …
Persistent link: https://www.econbiz.de/10013096459
This short paper demonstrates that the claim of Cumulative Prospect Theory (CPT) that people are risk seeking for loss … gives a power factor for losses of less than 1. This would mean that people are risk seeking for loss prospects. However …, makes the value function convex, which indicates risk aversion. It follows that people are generally risk averse both for …
Persistent link: https://www.econbiz.de/10013153144
that decision-makers tend to form beliefs that justify the previous investment decisions. A stronger risk taking motivates … more optimistic beliefs, in particular if it leads to losses. Sharing the responsibility for the risk taking reduces the … bias in the beliefs and this helps decision-makers to reduce the risk taking and limit the losses. The results suggest that …
Persistent link: https://www.econbiz.de/10012902707
The experiment reported in this paper identifies the effect of experience on revealed risk attitudes by examining “one …-shot” insurance choices made by subjects faced with a low-probability risk and their choices when they are faced with repeated … exposure to an identical risk. I find that subjects engaged in greater risk taking when making repeated choices. Estimates from …
Persistent link: https://www.econbiz.de/10012978485
We measure risk preferences for decisions that involve more than a single monetary attribute. According to theory, the … multivariate risk preferences correlation aversion, cross-prudence (coskewness preference) and cross-temperance (cokurtosis … aversion) determine how univariate risk preferences over attributes co-vary and interact. We obtain model-free measurements of …
Persistent link: https://www.econbiz.de/10013004097
We study an observable risk-return tradeoff for which risk "preferences" are normatively prescribed by the desire to …, teams should get more risk-loving as they fall further behind, matching prospect theory preferences. When leading, risk … aversion should increase with the lead, running counter to typical risk preferences. We find strong evidence that players trade …
Persistent link: https://www.econbiz.de/10013054200
In this work we asked if risk attitudes influence the way agents learn in a probabilistic environment. For that purpose … that after controlling for cognitive abilities (i.e. Raven's test), risk seekers in gains preferred to explore in this …
Persistent link: https://www.econbiz.de/10013057206