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Loss Aversion and Intertemporal Choice: A Laboratory Investigation

Author

Listed:
  • Robert Oxoby

    (University of Calgary)

  • William G. Morrison

Abstract

We present results from a laboratory study of loss aversion in the context of intertemporal choice. We investigate whether the provision of (windfall) endowments results in different elicited discount rates relative to subjects who earn income or earn and retain the income for a period before making intertemporal decisions. We hypothesize that loss aversion in an intertemporal choice yields higher discount rates among subjects earning and retaining. Our results support this hypothesis: among subjects who earn and retain their income we elicit substantially higher discount rates relative to those experiencing a windfall gain.

Suggested Citation

  • Robert Oxoby & William G. Morrison, "undated". "Loss Aversion and Intertemporal Choice: A Laboratory Investigation," Working Papers 2010-06, Department of Economics, University of Calgary, revised 26 Jan 2010.
    • Handle: RePEc:clg:wpaper:2010-06
    as

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    File URL: https://econ.ucalgary.ca/sites/econ.ucalgary.ca.manageprofile/files/unitis/publications/162-34176/MorrisonOxoby_March_2010.pdf
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    References listed on IDEAS

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    1. Todd L. Cherry & Peter Frykblom & Jason F. Shogren, 2002. "Hardnose the Dictator," American Economic Review, American Economic Association, vol. 92(4), pages 1218-1221, September.
    2. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    3. Jeff Dominitz & Charles F. Manski & Jordan Heinz, 2002. "Social Security Expectations and Retirement Savings Decisions," NBER Working Papers 8718, National Bureau of Economic Research, Inc.
    4. Maribeth Coller & Melonie Williams, 1999. "Eliciting Individual Discount Rates," Experimental Economics, Springer;Economic Science Association, vol. 2(2), pages 107-127, December.
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    Cited by:

    1. Plamen Nikolov, 2018. "Time Delay and Investment Decisions: Evidence from An Experiment in Tanzania," Economics Bulletin, AccessEcon, vol. 38(2), pages 1124-1137.

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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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