Abstract

http://ssrn.com/abstract=1578847
 
 

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A Structural Analysis of Disappointment Aversion in a Real Effort Competition


David Gill


University of Oxford - Department of Economics

Victoria L. Prowse


Cornell University - Department of Economics; Institute for the Study of Labor (IZA); German Institute for Economic Research (DIW Berlin)

September 1, 2010

American Economic Review, Forthcoming

Abstract:     
We develop a novel computerized real effort task, based on moving sliders across a screen, to test experimentally whether agents are disappointment averse when they compete in a real effort sequential-move tournament. We predict that a disappointment averse agent, who is loss averse around her endogenous choice-acclimating expectations-based reference point, responds negatively to her rival's effort. We find significant evidence for this discouragement effect, and use the Method of Simulated Moments to estimate the strength of disappointment aversion on average and the heterogeneity in disappointment aversion across the population.

Number of Pages in PDF File: 36

Keywords: Disappointment aversion, Loss aversion, Reference-dependent preferences, Reference point adjustment, Expectations, Tournament, Real effort experiment, Slider task

JEL Classification: C91, D03

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Date posted: March 31, 2010 ; Last revised: July 26, 2011

Suggested Citation

Gill, David and Prowse, Victoria L., A Structural Analysis of Disappointment Aversion in a Real Effort Competition (September 1, 2010). American Economic Review, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1578847

Contact Information

David Gill (Contact Author)
University of Oxford - Department of Economics ( email )
Department of Economics
University of Oxford
Oxford, Oxfordshire OX1 3UQ
United Kingdom
HOME PAGE: http://users.ox.ac.uk/~nuff0229/
Victoria L. Prowse
Cornell University - Department of Economics ( email )
414 Uris Hall
Ithaca, NY 14853-7601
United States
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
German Institute for Economic Research (DIW Berlin) ( email )
Mohrenstraße 58
Berlin, 10117
Germany
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