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Loss Aversion


Blavatskyy, Pavlo R (2008). Loss Aversion. Working paper series / Institute for Empirical Research in Economics No. 375, University of Zurich.

Abstract

Loss aversion is traditionally defined in the context of lotteries over monetary payoffs. This paper extends the notion of loss aversion to a more general setup where outcomes (consequences) may not be measurable in monetary terms and people may have fuzzy preferences over lotteries, i.e. they may choose in a probabilistic manner. The implications of loss aversion are discussed for expected utility theory and rankdependentnutility theory as well as for popular models of probabilistic choice such as the constant error/tremble model and a strong utility model (that includes the Fechner model of random errors and Luce choice model as special cases).

Abstract

Loss aversion is traditionally defined in the context of lotteries over monetary payoffs. This paper extends the notion of loss aversion to a more general setup where outcomes (consequences) may not be measurable in monetary terms and people may have fuzzy preferences over lotteries, i.e. they may choose in a probabilistic manner. The implications of loss aversion are discussed for expected utility theory and rankdependentnutility theory as well as for popular models of probabilistic choice such as the constant error/tremble model and a strong utility model (that includes the Fechner model of random errors and Luce choice model as special cases).

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
Dewey Decimal Classification:330 Economics
Language:English
Date:June 2008
Deposited On:29 Nov 2011 22:47
Last Modified:05 Apr 2017 23:15
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

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