On Myopic Loss Aversion

24 Pages Posted: 7 Oct 2016 Last revised: 19 May 2018

Piotr Evdokimov

Instituto Tecnológico Autónomo de México (ITAM) - Centro de Investigacion Economica

Date Written: May 16, 2018

Abstract

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

Evdokimov, Piotr, On Myopic Loss Aversion (May 16, 2018). Available at SSRN: https://ssrn.com/abstract=2849067 or http://dx.doi.org/10.2139/ssrn.2849067

Piotr Evdokimov (Contact Author)

Instituto Tecnológico Autónomo de México (ITAM) - Centro de Investigacion Economica ( email )

Av. Camino a Santa Teresa #930
Col. Heroes de Padierna
Mexico City, D.F. 10370
Mexico

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