Deciding When to Quit: Reference-Dependence Over Slot Machine Outcomes

5 Pages Posted: 27 Jul 2015

See all articles by Jaimie W. Lien

Jaimie W. Lien

The Chinese University of Hong Kong (CUHK) - Department of Decision Sciences & Managerial Economics

Jie Zheng

Tsinghua University - School of Economics & Management

Date Written: January 11, 2015

Abstract

We conduct tests for reference dependent loss aversion using slot machine gamblers' decisions on when to quit playing for a visit to a casino. Evidence for a lagged status-quo reference point is found in the aggregate, while endogenously determined reference points are found when conditioning on betting intensity choices. Significant deviations from the distributions implied by random quitting support the loss aversion and diminishing sensitivity hypotheses.

Keywords: Consumer Economics, Decision-Making under Risk and Uncertainty, Gambling

JEL Classification: D12, D81, L83

Suggested Citation

Lien, Jaimie W. and Zheng, Jie, Deciding When to Quit: Reference-Dependence Over Slot Machine Outcomes (January 11, 2015). American Economic Review (Papers and Proceedings), Vol. 105, 2015, Available at SSRN: https://ssrn.com/abstract=2636123

Jaimie W. Lien (Contact Author)

The Chinese University of Hong Kong (CUHK) - Department of Decision Sciences & Managerial Economics ( email )

Shatin, N.T.
Hong Kong

Jie Zheng

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

HOME PAGE: http://jzheng.weebly.com/

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