External Seminar by Olivier L’Haridon

20-06-2019 from 11:30 to 12:45
Faculty Council Board (Facultaire Raadzaal), Tweekerkenstraat 2, 2nd floor
Department of Economics
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An Effective and Simple Tool for Measuring Loss Aversion

By Olivier L’Haridon (Université de Rennes)

Please register by Monday 17 June at https://doodle.com/poll/4r7wiakrrenvw5i6.


Under prospect theory a truth-telling mechanism for assessing personal beliefs, the quadratic scoring rule, is exploited to develop a new measurement tool for loss aversion. As the latter is a local measure of behavior at the reference point, exhibited as a concave kink in the utility, and utility can be assumed linear for small scale gains or losses, we can directly measure loss aversion without invoking the elicitation of entire utility functions. Under these plausible assumptions and testable properties of probability weighting functions, an experimenter can identify the degree of loss aversion of a subject with only two quadratic scoring rule questions. The additional benefits of the new tool are inherited from charachteristic properties of scoring rules: simplicity of implementation for experimenters, easy to understand for experimental subjects, incentive compatibility, and lack of error propagation.


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