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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Loss Aversion? Not with Half-a-Million on the Table! |
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| Institution | University of Zurich |
| Series Name | Working paper series / Institute for Empirical Research in Economics |
| Number | No. 274 |
| ISSN | 1424-0459 |
| Date | 2006 |
| Abstract Text | In the television show Affari Tuoi a contestant is endowed with a sealed box containing anmonetary prize between one cent and half a million euros. In the course of the show the contestant is offered to exchange her box for another sealed box with the samendistribution of possible monetary prizes inside. This offers a unique natural laboratory for testing the predictions of expected utility theory versus prospect theory using lotteries with large stakes. While expected utility theory predicts that an individual is exactly indifferent between accepting and rejecting the exchange offer, prospect theory predictsnthat an individual should always reject the exchange offer due to the assumption of loss aversion. We find that the assumption of loss aversion is violated by 46 percent of all contestants in our recorded sample. Thus, contestants do not appear to be predominantly loss averse when dealing with lotteries involving large stakes. |
| Official URL | http://www.econ.uzh.ch/wp.html |
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