Loss Aversion in the Laboratory

13 Pages Posted: 19 Jul 2014

See all articles by William G. Morrison

William G. Morrison

Wilfrid Laurier University

Robert J. Oxoby

University of Calgary - Department of Economics; IZA Institute of Labor Economics

Abstract

We report the results of a laboratory experiment testing for the existence of loss aversion in a standard risk aversion protocol (Holt and Laury, 2002). In our experiment, participants earn and retain money for a week before using it in an incentivized risk preference elicitation task. We find loss aversion, distinct from risk aversion, has a significant effect on behavior resulting in participants requiring higher compensation to bear risk.

Keywords: risk aversion, loss aversion, experiments

JEL Classification: C91, D91

Suggested Citation

Morrison, William G. and Oxoby, Robert J., Loss Aversion in the Laboratory. IZA Discussion Paper No. 8309, Available at SSRN: https://ssrn.com/abstract=2468465 or http://dx.doi.org/10.2139/ssrn.2468465

William G. Morrison (Contact Author)

Wilfrid Laurier University ( email )

Robert J. Oxoby

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada
403-220-2586 (Phone)
403-282-5262 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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