Untitled

Schmidt, Ulrich; Traub, Stefan

doi:10.1023/a:1020923921649

Cited by 172 publications

(18 citation statements)

References 10 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Any loss aversion parameter above these respective values will support depressed demand, in large part because of a preference against paying premium and receiving no indemnity. Loss aversion parameter estimates reported in the literature are substantially above 1.3 (Abdellaoui, Bleichdodt, & Paraschiv, 2007), ranging between 1.43 at the low end (Schmidt & Traub, 2002) to 4.8 at the high end (Fishburn & Kochenberger, 1979). Bocquého et al (2014) obtained 2.275 whereas Liu (2013), for cotton farmers in China, obtained the mean of parameter estimates as 3.47.…”

Section: Third Generation Prospect Theorymentioning

confidence: 90%

Depressed demand for crop insurance contracts, and a rationale based on third generation Prospect Theory

Feng

Hennessy

2019

Agricultural Economics

View full text Add to dashboard Cite

When actuarially fair insurance for a major risk is available then standard economic theory posits that those subject to the risk should insure. In agriculture, it is common for producers to decline contract offers where presubsidy premiums just cover average losses and subsidies are substantial. This paper seeks to shed light on why demand is curtailed. In a mail survey of U.S. corn and soybean producers we solicited Willingness to Pay (WTP) for actuarially fair insurance at different coverage levels. We find demand to be so low that median WTP is no larger than fair premium when adjusted down by current subsidy rates, which pay for one half or more of most premium charges. WTP as a share of the fair rate is especially low when risk of loss is high. There is limited evidence that respondents appreciate the convex relationship between coverage level and expected indemnity payoff. Third generation Prospect Theory is shown to be consistent with observed findings. In particular, a strong distaste for paying premium can be rationalized by loss aversion. Furthermore, when high revenue outcomes are more likely than not, that is, negative skewness, then higher loss aversion, greater decision weight distortions and greater risk aversion will decrease WTP.

show abstract

Section: Third Generation Prospect Theorymentioning

confidence: 90%

Depressed demand for crop insurance contracts, and a rationale based on third generation Prospect Theory

Feng

Hennessy

2019

Agricultural Economics

View full text Add to dashboard Cite

show abstract

“…Some studies find that females are more risk seeking in losses (Schubert et al 1999;Fehr-Duda, De Gennaro, and Schubert 2006), while others find that females are more risk averse in losses (Levin, Snyder, and Chapman 1988). On the other hand, Booij, Van Praag, and Van De Kuilen (2010) and Fehr-Duda, De Gennaro, and Schubert (2006) find no gender difference in utility curvature in gains and losses, suggesting the observed differences in risk attitudes may be driven by loss aversion (Booij, Van Praag, and Van De Kuilen 2010;Brooks and Zank 2005;Schmidt and Traub 2002) or probability weighting (Fehr-Duda, De Gennaro, and Schubert 2006). Therefore, the gender differences of risk attitude in losses are generally less conclusive, and further investigation is needed to test to what extent such results can be generalized (see Croson and Gneezy 2009;Eckel and Grossman 2008; for summaries of gender difference of risk preference in gains and losses).…”

Section: A Brief Literature Reviewmentioning

confidence: 99%

Is Roger Federer more loss averse than Serena Williams?

et al. 2016

View full text Add to dashboard Cite

Using data from the high-stakes 2013 Dubai professional tennis tournament, we find that, compared with a tied score, (i) male players have a higher serve speed and thus exhibit more effort when behind in score, and their serve speeds get less sensitive to losses or gains when score difference gets too large, and (ii) female players do not change their serve speed when behind, while serving slower when ahead. Thus, male players comply more with Prospect Theory exhibiting more loss aversion and reflection effect. Our results are robust to controlling for player fixed effects and characteristics with player random effects.

show abstract

“…Somewhat similarly, studies using accept-reject or willingnessto-pay formats also focused primarily on large hypothetical outcomes, suggesting that their results could be due to risk aversion (Redelmeier & Tversky, 1992;Schmidt & Traub, 2002;Wedell & Böckenholt, 1994). The only study that explicitly compared the effect of payoff size on loss aversion using the willingness-to-pay paradigm is that of Harinck et al (2007).…”

Section: Experiential Tasksmentioning

confidence: 99%

Losses as modulators of attention: Review and analysis of the unique effects of losses over gains.

Yechiam¹,

Hochman²

2013

Psychological Bulletin

243

290

View full text Add to dashboard Cite

It has been shown that in certain situations losses exert a stronger effect on behavior than respective gains, and this has been commonly explained by the argument that losses are given more weight in people's decisions than respective gains. However, although much is understood about the effect of losses on cognitive processes and behavior, 2 major inconsistencies remain. First, recent empirical evidence fails to demonstrate that people avoid incentive structures that carry equivalent gains and losses. Second, findings in experience-based decision tasks indicate that following losses, increased arousal is observed simultaneously with no behavioral loss aversion. To account for these findings, we developed an attention-allocation model as a comprehensive framework for the effect of losses. According to this model losses increase on-task attention, thereby enhancing the sensitivity to the reinforcement structure. In the current article we examine whether this model can account for a broad range of empirical phenomena involving losses. We show that as predicted by the attentional model, asymmetric effects of losses on behavior emerge where gains and losses are presented separately but not concurrently. Yet, even in the absence of loss aversion, losses have distinct effects on performance, arousal, frontal cortical activation, and behavioral consistency. The attentional model of losses thus explains some of the main inconsistencies in previous studies of the effect of losses.

show abstract

Untitled

Cited by 172 publications

References 10 publications

Depressed demand for crop insurance contracts, and a rationale based on third generation Prospect Theory

Depressed demand for crop insurance contracts, and a rationale based on third generation Prospect Theory

Is Roger Federer more loss averse than Serena Williams?

Losses as modulators of attention: Review and analysis of the unique effects of losses over gains.

Contact Info

Product

Resources

About