COVID-19 enhanced diminishing sensitivity in prospect-theory risk preferences: A panel analysis

Arbeitspapier

Based on unique panel data from a five-wave internet survey in Japan, we show how the coronavirus disease 2019 pandemic affected people's prospect-theory risk preferences, especially in the loss domain. The panel analysis indicates that with the spread of the pandemic, diminishing sensitivity becomes stronger for the participants' value and probability weighting functions. Thus, due to the pandemic, (i) people become less sensitive to an increase in losses and feel less paindue to losses, especially large ones; and (ii) they become more pessimistic towards tail loss risks, and more optimistic towards non-tail loss risks. One implication is that people have become less cautious of the risks of suffering large non-tail losses, which might retard the recovery of society.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ISER Discussion Paper ; No. 1106

Classification and Topics

• Classification: Wirtschaft ; Micro-Based Behavioral Economics: General‡ ; Behavioral Finance: General‡
• Subject: COVID-19 ; prospect theory ; risk ; value function ; probability weighting function

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ikeda, Shinsuke ; Yamamura, Eiji ; Tsutsui, Yoshiro
• Event: Veröffentlichung
• (who): Osaka University, Institute of Social and Economic Research (ISER)
• (where): Osaka
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/234918
• Last update: 10.03.2025, 11:44 AM CET