Loss Aversion under Risk: The Role of Complexity

Konferenzbeitrag

In choice under risk, differences between alternative states of the world render choice environments complex. Moreover, they entail powerful experiences of loss if satisfaction falls short of prospective states that did not materialize. An increase in complexity, i.e. a larger number of differences, can have ambiguous effects on loss aversion. Complexity can direct the decision maker's attention to prospective experiences of loss but also requires a higher cognitive effort of weighting and comparing satisfaction in all states. This paper investigates empirically how loss aversion interacts with complexity. Structural estimates of preference parameters indicate an inverse-U shaped relationship between complexity and the weight of expected gain-loss utility in choice under risk.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2016: Demographischer Wandel - Session: Decision-Making under Risk and Ambiguity ; No. D04-V3

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Criteria for Decision-Making under Risk and Uncertainty ; Expectations; Speculations

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cagala, Tobias
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel und Hamburg
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/145488
• Last update: 10.03.2025, 11:41 AM CET