Dread Aversion and Economic Preferences

29 Pages Posted: 9 Apr 2021

See all articles by Chris Dawson

Chris Dawson

University of Bath

Samuel Johnson

University of Bath - School of Management

Date Written: April 8, 2021

Abstract

We are often preoccupied with the future, experiencing dread at the thought of future misery and savoring the thought of future pleasure. Prior lab studies have found that these anticipatory emotions influence decision-making. In this article, using a novel approach, we use economic survey data to estimate individual differences in anticipatory emotions, finding that the tendency to feel displeasure (dread) from anticipating future losses outweighs the pleasure (savoring) from anticipating equal gains—that is, people are dread-averse. We then relate anticipatory emotions to key economic preferences, finding that more dread-averse people are more risk-averse (because they obtain more disutility from contemplating downside risk) and more impatient (because they want to minimize the time spent contemplating risks). We conclude by considering how dread aversion can provide novel explanations for a variety of intertemporal and risky choice phenomena. Dread aversion explains why people are both risk-averse and impatient and provides suggestive evidence as to why these traits are linked.

Keywords: Anticipatory emotions, Time preferences, Risk preferences, Behavioral economics

Suggested Citation

Dawson, Chris and Johnson, Samuel, Dread Aversion and Economic Preferences (April 8, 2021). Available at SSRN: https://ssrn.com/abstract=3822640 or http://dx.doi.org/10.2139/ssrn.3822640

Chris Dawson (Contact Author)

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Samuel Johnson

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

HOME PAGE: http://www.sgbjohnson.com/

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