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Investment in education under disappointment aversion

Author

Listed:
  • Dan Anderberg

    (Royal Holloway University of London)

  • Claudia Cerrone

    (Max Planck Institute for Research on Collective Goods)

Abstract

This paper develops a model of risky investment in education under disappointment aversion, modelled as loss aversion around one's endogenous expectation. The model shows that disappointment aversion reduces investments in education for lower ability people and increases investments for higher ability people, thereby magnifying the gap between them generated by the riskiness of education.

Suggested Citation

  • Dan Anderberg & Claudia Cerrone, 2017. "Investment in education under disappointment aversion," Economics Bulletin, AccessEcon, vol. 37(3), pages 1533-1540.
    • Handle: RePEc:ebl:ecbull:eb-16-00850
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2017/Volume37/EB-17-V37-I3-P138.pdf
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    References listed on IDEAS

    as
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    6. Guilhem Lecouteux & Léonard Moulin, 2015. "To gain or not to lose? Tuition fees for loss averse students," Economics Bulletin, AccessEcon, vol. 35(2), pages 1005-1019.
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    9. Dan Anderberg & Claudia Cerrone, 2014. "Education, Disappointment and Optimal Policy," CESifo Working Paper Series 5141, CESifo.
    10. Adam M. Lavecchia & Heidi Liu & Philip Oreopoulos, 2014. "Behavioral Economics of Education: Progress and Possibilities," NBER Working Papers 20609, National Bureau of Economic Research, Inc.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    education; risk; disappointment aversion; endogeneous reference points.;
    All these keywords.

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • D1 - Microeconomics - - Household Behavior

    Statistics

    Access and download statistics

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