Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Loss Aversion and Consumption Choice: Theory and Experimental Evidence †

Loss Aversion and Consumption Choice: Theory and Experimental Evidence † Abstract We analyze a consumer-choice model with price uncertainty, loss aversion, and expectation-based reference points. The implications of this model are tested in an experiment in which participants have to make a consumption choice between two sandwiches. Participants differ in their reported taste for the two sandwiches and in their degree of loss aversion, which we measure separately. We find that more-loss-averse participants are more likely to opt for the cheaper sandwich, in line with theoretical predictions. The estimates in the model with rational expectations are slightly more significant than those with naïve expectations. (JEL D11, D12, D84, M31 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Loss Aversion and Consumption Choice: Theory and Experimental Evidence †

Loading next page...
 
/lp/american-economic-association/loss-aversion-and-consumption-choice-theory-and-experimental-evidence-SFWuieW3uw

References

References for this paper are not available at this time. We will be adding them shortly, thank you for your patience.

Publisher
American Economic Association
Copyright
Copyright © 2015 by the American Economic Association
Subject
Articles
ISSN
1945-7685
eISSN
1945-7685
DOI
10.1257/mic.20130104
Publisher site
See Article on Publisher Site

Abstract

Abstract We analyze a consumer-choice model with price uncertainty, loss aversion, and expectation-based reference points. The implications of this model are tested in an experiment in which participants have to make a consumption choice between two sandwiches. Participants differ in their reported taste for the two sandwiches and in their degree of loss aversion, which we measure separately. We find that more-loss-averse participants are more likely to opt for the cheaper sandwich, in line with theoretical predictions. The estimates in the model with rational expectations are slightly more significant than those with naïve expectations. (JEL D11, D12, D84, M31 )

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: May 1, 2015

There are no references for this article.