Asset Integration, Risk Taking and Loss Aversion in the Laboratory

Arbeitspapier

We report on a laboratory experiment testing for the presence of loss aversion, as separate from risk aversion, utilizing an asset integration protocol designed to ensure that a loss of cash provided by the experimenter is viewed as a real loss by experimental participants. Our experimental design augments the Holt-Laury risk preference elicitation methodology to assess how individuals choose between a safe option and a riskier lottery. When the money at stake is viewed as the individual's own money, one of the lottery outcomes is in the domain of losses. Our results confirm that individuals display an additional reluctance to participate in a mixed domain lottery beyond that predicted by risk aversion. We show that only preference functions incorporating loss aversion are able to generate predicted behaviour that matches our results.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 12268

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Criteria for Decision-Making under Risk and Uncertainty
• Subject: risk taking ; experiments

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Morrison, William G. ; Oxoby, Robert J.
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/196766
• Last update: 10.03.2025, 11:44 AM CET