A loss averse buyer and seller face an uncertain environment. Should they write a long-term contract or wait until the state of the world has realized? I show that simple long-term contracts perform better than insinuated in Herweg and Schmidt (2015), even though loss aversion makes...

A loss-averse buyer and seller face an uncertain environment. Should they write a long-term contract or wait until the state of the world is realized? I show that simple long-term contracts perform better than insinuated in Herweg and Schmidt (2015), even though loss aversion makes renegotiation...

We conduct a laboratory experiment to explore whether loss aversion applies to social image concerns. First, subjects are ranked publicly in a social image relevant domain, an IQ test, to establish own rank as a within-subject reference point. We then induce an exogenous change in within-subject...

We exploit administrative data on exact commuting distances for a large sample of German employees and study the relation of commuting and wages. We find that it requires 1.5 times as much money in terms of higher wages for job changers to accept an increase of their commute as compared to their...

Whether people seek or avoid risks on gambling, insurance, asset, or labor markets crucially depends on the skewness of the underlying probability distribution. In fact, people typically seek positively skewed risks and avoid negatively skewed risks. We show that salience theory of choice under...