36 Pages Posted: 31 Mar 2010 Last revised: 26 Jul 2011
Date Written: September 1, 2010
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.
Keywords: Disappointment aversion, Loss aversion, Reference-dependent preferences, Reference point adjustment, Expectations, Tournament, Real effort experiment, Slider task
JEL Classification: C91, D03
Suggested Citation: 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: https://ssrn.com/abstract=1578847