Estimating parametric loss aversion with prospect theory: Recognising and dealing with size dependence

Autor:	Kelvin Balcombe, Samuel Dadzie, Nicholas Bardsley, Iain Fraser
Rok vydání:	2019
Předmět:	Normalization (statistics) Behavioral variation Organizational Behavior and Human Resource Management Economics and Econometrics Prospect theory Loss aversion HB Bayesian probability Econometric methods Econometrics Size dependence Parametric statistics Mathematics
Zdroj:	Journal of Economic Behavior & Organization. 162:106-119
ISSN:	0167-2681
DOI:	10.1016/j.jebo.2019.04.017
Popis:	Parameteric identification of loss aversion requires either the imposition of rotational symmetry on the utility function or a point dependent normalization condition. In this paper, we propose a new approach in which point dependence is reduced by integration over normalization points. To illustrate our approach, we consider a sample of Ghanaian farmers’ risk preferences over the gain, loss and mixed domains. Using Bayesian econometric methods, we find support for Prospect Theory albeit with substantial behavioral variation across individuals plus mild overweighting of losses compared to gains. We also show that the majority of respondents are mildly loss averse especially as the size of the payoffs increase.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_dedup___::fda0ca25c56afac9ad39b37bb69f50aa https://doi.org/10.1016/j.jebo.2019.04.017 Zobrazit plný text záznamu Full Text from ScienceDirect