Measuring Loss Aversion under Ambiguity: A Method to Make Prospect Theory Completely Observable

Autor: Han Bleichrodt, Mohammed Abdellaoui, Olivier l'Haridon, Dennie van Dolder
Přispěvatelé: Applied Economics, Finance, Ecole des Hautes Etudes Commerciales (HEC Paris), Groupement de Recherche et d'Etudes en Gestion à HEC (GREGH), Ecole des Hautes Etudes Commerciales (HEC Paris)-Centre National de la Recherche Scientifique (CNRS), Erasmus School of Economics, Erasmus University Rotterdam, Department of Applied Economics, Centre de recherche en économie et management (CREM), Université de Caen Normandie (UNICAEN), Normandie Université (NU)-Normandie Université (NU)-Université de Rennes (UR)-Centre National de la Recherche Scientifique (CNRS), School of Economics, University of Nottingham, University of Nottingham, UK (UON), Centre National de la Recherche Scientifique (CNRS)-Université de Rennes 1 (UR1), Université de Rennes (UNIV-RENNES)-Université de Rennes (UNIV-RENNES)-Université de Caen Normandie (UNICAEN), Normandie Université (NU)-Normandie Université (NU)
Jazyk: angličtina
Rok vydání: 2016
Předmět:
Risk
Economics and Econometrics
Ambiguity
Computer science
media_common.quotation_subject
Measure (mathematics)
Loss aversion
Consistency (statistics)
Prospect theory
Accounting
0502 economics and business
Econometrics
JEL: C - Mathematical and Quantitative Methods/C.C9 - Design of Experiments/C.C9.C91 - Laboratory
Individual Behavior
050207 economics
media_common
Event (probability theory)
050208 finance
05 social sciences
Elicitation methods
JEL: D - Microeconomics/D.D8 - Information
Knowledge
and Uncertainty/D.D8.D81 - Criteria for Decision-Making under Risk and Uncertainty
Function (mathematics)
[SHS.ECO]Humanities and Social Sciences/Economics and Finance
Weighting
[SHS.GESTION]Humanities and Social Sciences/Business administration
Utility for gains and losses
JEL: D - Microeconomics/D.D0 - General/D.D0.D03 - Behavioral Microeconomics: Underlying Principles
Finance
Zdroj: Journal of Risk and Uncertainty, 52(1), 1-20. Springer Netherlands
Abdellaoui, M, Bleichrodt, H, L'Haridon, O & van Dolder, D 2016, ' Measuring Loss Aversion under Ambiguity: A Method to Make Prospect Theory Completely Observable ', Journal of Risk and Uncertainty, vol. 52, no. 1, pp. 1-20 . https://doi.org/10.1007/s11166-016-9234-y
Journal of Risk and Uncertainty
Journal of Risk and Uncertainty, 2016, 52 (1), pp.1-20. ⟨10.1007/s11166-016-9234-y⟩
Journal of Risk and Uncertainty, Springer Verlag, 2016, 52 (1), pp.1-20. ⟨10.1007/s11166-016-9234-y⟩
ISSN: 0895-5646
1573-0476
DOI: 10.1007/s11166-016-9234-y
Popis: International audience; We propose a simple, parameter‐free method that, for the first time, makes it possible to completely observe Tversky and Kahneman’s (1992) prospect theory. While methods existed to measure event weighting and the utility for gains and losses separately, there was no method to measure loss aversion under ambiguity. Our method allows this and thereby it can measure prospect theory’s entire utility function. Consequently, we can properly identify properties of utility and perform new tests of prospect theory. We implemented our method in an experiment and obtained support for prospect theory. Utility was concave for gains and convex for losses and there was substantial loss aversion. Both utility and loss aversion were the same for risk and ambiguity, as assumed by prospect theory, and sign‐comonotonic trade‐off consistency, the central condition of prospect theory, held.
Databáze: OpenAIRE
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