Risk aversion or myopia? Choices in repeated gambles and retirement investments
Article Abstract:
A study was conducted to analyze the choices of decision makers when faced with multiple plays of a gamble or investment. Three repeated gambles that were similar from a normative perspective were developed. The gambles supported differences in the magnitude of single trial losses. Workers' decision to invest their retirement savings in stocks were examined. Results indicated that decision makers are sensitive to the amount to lose on a single trial and display myopic loss aversion. Findings also revealed that the way that information is given can significantly influence choices. In addition, it was shown that workers invest more of their retirement savings in stocks if they are shown long-term rates of return.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1999
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Gambling with the house money and trying to break even: the effects of prior outcomes on risky choice
Article Abstract:
The results of real money experiments into decision making reveal that previous gains or losses can have a significant impact on the future choices made by decision makers. Although making generalizations about risk taking is hard, a previous gain will likely increase the probability that decision makers will take risks, while a previous loss will likely have the opposite effect. Those decision makers that have had previous losses are also more likely to accept situations that offer chances to break even.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1990
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Bias in utility assessments: further evidence and explanations
Article Abstract:
The systematic and sizable bias created in judgements about simple gambles are examined using probability and certainty equivalence methods. Results indicate that: the degree and direction of bias are dependent on the assessment gamble characteristics; the direction and size of bias can be changed by presenting the subjects with explicit anchors; and the use of expectation strategies results in significantly less bias than the use of heuristic response strategies.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1989
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