On Myopic Loss Aversion
24 Pages Posted: 7 Oct 2016 Last revised: 19 May 2018
Date Written: May 16, 2018
It has been widely documented in laboratory experiments that subjects act more risk-averse when they make their decisions frequently (e.g., one as opposed to several decisions at a time), a phenomenon dubbed 'myopic loss aversion' by Benartzi and Thaler (1995). The present paper shows that this standard pattern of behavior can be reversed with a simple change in the experimental design. The results cannot be explained by mental accounting or loss aversion but are consistent with the simple hypothesis that behavior is less random when the stakes are higher.
Keywords: myopic, loss, aversion, reference, point, random, utility, stochastic, choice
JEL Classification: D81, C91, D01, D03
Suggested Citation: Suggested Citation