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We introduce expectations-based loss aversion, which can explain the empirically well-documented endowment and attachment effect, into the classical bilateral-trade setting (Myerson and Satterthwaite in J. Econ. Theory 29:265–281, 1983). We derive optimal mechanisms for different objectives and find that relative to no loss aversion, the platform designer optimally provides agents with partial insurance in the ownership dimension and with full insurance in the money dimension. Notably, the former is achieved either by increasing or decreasing the trade frequency, depending on the distribution of types. Finally, we show that the impossibility of inducing materially efficient trade persists with loss aversion. [ABSTRACT FROM AUTHOR]

We investigate the existence and nature of momentum in performance in contests and whether momentum arises for reasons in part unrelated to rational strategies in contests. To address this question, we look at a setting where strategic considerations should not generate momentum: a sequence of two rounds of independent contests. We show that if we relax the assumption of payoff maximizing agents, positive momentum (success tends to be followed by more success) or negative momentum (success tends to be followed by less success) can arise through several behavioral mechanisms that have, until now, not been widely considered in the literature. We examine these predictions in an experiment. Using random variations in the participants' winning chances in a first contest to identify the causal effect of success on later performance, we find that a positive momentum exists. Using several experimental conditions which modulate the effect of the different possible mechanisms, we find that the pattern of momentum is most compatible with players having adaptive preferences, whereby they may gain or lose interest in the second contest after respectively winning or losing the first one. These results suggest that standard models of contests do not fully capture the behavioral dynamics existing in competitive settings. [ABSTRACT FROM AUTHOR]

Manufacturers and consumers are boundedly rational and ultimately seek evolutionarily stable strategies through trial and error, imitation, and learning. It is important to study the pricing strategies of manufacturers and the purchasing channel decisions of consumers in the context of increasingly fierce competition in online channels, in addition to consumers' loss aversion due to increasingly confusing promotional strategies; accordingly, in this paper, an evolutionary game including both parties is constructed, and the loss aversion factor from prospect theory is introduced. Based on data from Chinese media reports on the cosmetics industry, simulation and sensitivity analyses were conducted using Matlab R2024a. The results indicate that—in addition to channel services affecting the evolutionarily stable strategy for purchasing channel selection—a decrease in consumer loss aversion will help consumers reach the evolutionarily stable strategy faster. For manufacturers, channel services do not affect their evolution to a unified pricing strategy; however, when consumer loss aversion increases, manufacturers' evolutionarily stable strategy will shift from a unified pricing strategy to a differentiated pricing strategy. [ABSTRACT FROM AUTHOR]

This article characterizes optimal social security in economies with agents who exhibit loss aversion. Two forms of loss aversion are explored. In the first, workers have a fixed retirement age and are loss averse over private savings. This motivates a more generous social security program. In the second, workers do no private savings but can choose their retirement age, exhibiting loss aversion over the foregone leisure time from delayed retirement. Social security benefits consequently rise steeper with retirement age and an earlier normal retirement age is optimal. In both cases, optimal policy is highly sensitive to the introduction of loss averse preferences. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to identify individuals' biases while making investment decisions and explore how these biases can be incorporated into a robo-advisory platform to help mitigate these biases. This paper identifies eight investment-related behavioral biases: mental accounting, gambler's fallacy, hindsight, regret aversion, disposition, trend-chasing, loss aversion and herding. Design/methodology/approach: This study uses primary data from 263 respondents across various age groups, of which approximately 50 were wealth management professionals in the UAE. A random sampling method from probability sampling is employed to gather the primary data. The identified biases serve as dependent variables; the age and income of individuals serve as the independent variables. Findings: Age and income are significantly related to mental accounting, herding, gambler fallacy and loss aversion. Existing studies on behavioral finance demonstrate that individuals who make investment decisions are susceptible to cognitive fallacies, leading to nonrational investment decisions. Practical implications: By studying these biases affecting individuals of varying ages and income levels, wealth management professionals can tailor their financial robo-advisory services to address these biases and help clients build wealth with consistent investment. Originality/value: This study uses survey-based sampling in the context of the UAE; hence, the data and analysis represent originality. [ABSTRACT FROM AUTHOR]

Purpose – In this study, the authors seek to understand factors that naturally influence users to adopt two-factor authentication (2FA) without even trying to intervene by investigating factors within individuals that may influence their decision to adopt 2FA by themselves. Design/methodology/approach – A total of 1,852 individuals from all 34 provinces in Indonesia participated in this study by filling out online questionnaires. The authors discussed the results from statistical analysis further through the lens of the loss aversion theory. Findings – The authors found that loss aversion, represented by higher income that translates to greater potential pain caused by losing things to be the most significant demographic factor behind 2FA adoption. On the contrary, those with a low-income background, even if they have some college degree, are more likely to skip 2FA despite their awareness of this technology. The authors also found that the older generation, particularly females, to be among the most vulnerable groups when it comes to authentication-based cyber threats as they are much less likely to adopt 2FA, or even to be aware of its existence in the first place. Originality/value – Authentication is one of the most important topics in cybersecurity that is related to human-computer interaction. While 2FA increases the security level of authentication methods, it also requires extra efforts that can translate to some level of inconvenience on the user's end. By identifying the associated factors from the user's ends, a necessary intervention can be made so that more users are willing to jump on the 2FA adopters' train.

The cause-and-effect relationship between incentives and market research response rates is well documented. In general, we understand that - mediated by factors such as privacy and difficulty - the greater the compensation offered to participants, the greater propensity for task completion. However, there is little understanding of how the way in which an incentive is communicated impacts results. We believe studying this field will help insight industry practitioners who are often challenged by limited or fixed incentive budgets. By exploring and ranking framing methods, we aim to recommend to researchers the tactical options that will maximise return on investment. In this initial exploration, we have narrowed framing choices to a set identified by the field of behavioural economics. In particular, we investigate the relative impact of: (1) financial incentives, (2) the endowment effect, (3) social proof, (4) altruism and, (5) financial incentives plus loss aversion. These conditions can be considered to broadly fit within one of three categories: (a) financial incentives alone, (b) behavioural principles alone, (c) financial incentives plus behavioural principles. To replicate the real-world challenges of insight professionals, this was tested in an experimental design that sought to recruit existing Aegon customers into a new research panel. The experimental case study format also lends itself to high volumes. The results of this study are based on 91,289 recruitment emails delivered to Aegon customers across various weekday mornings. Each email contained either neutral information regarding the incentive to join - the opportunity to win up to £250 - or the same message framed using one of the experimental methods in test. Messages were repeated both in the subject line and the email body. Results were measured and analysed at the points of: (A) email open, (B) email click, (C) conversion as defined by screener completion, (D) conversion as defined by panel account created, and (E) engagement as defined by completing at least one task on the panel eligible for a point reward within 3 months of signup. Additionally, the unsubscribe rate was measured and compared across all messages. Prior to the launch of the study, our hypotheses were that email communications which utitlised the endowment effect, social proof or altruism would lead to higher conversion rates than messages regarding incentivisation. Further, we hypothesised that emails which utilised both financial incentives plus loss aversion framing in an additive capacity would deliver the highest conversion rate. Our analysis led to a rejection of all hypotheses. Ultimately, it was concluded that none of the tested framing effects performed significantly better, as per chi-squared tests, than the financial incentive group across open rate, click rate, conversion rate or engagement rate. However, the addition of loss aversion performed on par with the incentive only group for panel engagement. Further, the use of loss aversion, altruism and the endowment effect all led to significantly lower unsubscribe rates than the incentive only group. This led to a nuanced conclusion which surmised that the loss aversion tactic, when used in an additive capacity to a financial incentive, appears to offer the most balanced risk profile for research professionals, whilst the endowment effect, social proof and altruism offer moderate to worse risk profiles. Finally, we highlight the need for more proof in this field - suggesting that future efforts replicate the study with a general population sample or non-financial services case studies. [ABSTRACT FROM AUTHOR]

Purpose – Determining the impact of behavioral influences on the stock market has significant implications for investment analysis and portfolio management. Behavioral biases are parameters that need to be considered in investment decision-making. The purpose of this study is to inform Bangladeshi investors about behavioral biases that they may encounter when making investment decisions in the prevailing frontier environment. Design/methodology/approach – Through the chi-square test, one-way ANOVA, paired-samples t-test and descriptive analysis based on the facts collected from 281 respondents of the Dhaka Stock Exchange (DSE), the study has found that individual investors of Bangladesh often make investment decisions emotionally rather than based on theories. Findings – The result shows that risk aversion and risk perception are the two most influential emotional dimensions that impact investors' decisions. The findings are consistent with the other researchers and highlight the fact that investors hardly act according to the norms recommended in the financial theories. Research limitations/implications – The findings are grounded on a small portion of investors at DSE on some particular days, which is not sufficient to study individual investors' entire complex decision-making behavior from various angles. Many respondents were reluctant and even confused to disclose their behavioral aspects. These, along with biased and careless answers, may impede the identification of the actual scenario of the behavioral responses in decision-making that demand further study. Originality/value – The novelty of this study is unique in that it examined investors of the DSE, who are considered to be a representative in a frontier market like Bangladesh. Since this market is not very resilient, small investors need to be aware of the biases of behavioral factors to survive.

Introduction: This paper evaluates an experimental rule change trialed in the League of Ireland for one season in the early 1980s, where four points were awarded for an away win, three for a home win, two for an away draw, and one for a home draw. This pay-off structure was designed to incentivize visiting teams to engage in more offensive play, thus potentially increasing the number of goals scored per game and reducing the incidence of drawn games. Methods: Using match-level data for six playing seasons, the impact of this reward scheme on an array of match-level outcomes is evaluated using an array of fixed effects regression models. Results and discussion: The key empirical findings suggest this change to the pay-off structure did not reduce the drawn game rate but did induce a modest increase in the average goal scoring of the home team with subsequent implications for average goal difference. The absence of an effect for the visiting team is rationalized in terms of prospect theory, and the asymmetric implication of the policy change for the respective loss aversion parameters of the home and the visiting teams. In addition, we also use a lottery framework to further demonstrate why the short-lived pay-off structure failed in its primary objective to incentivize visiting teams to engage in more offensive play. [ABSTRACT FROM AUTHOR]

Is irrational behavior the incidental outcome of biological constraints imposed on neural information processing? In this work, we consider the paradigmatic case of gamble decisions, where gamble values integrate prospective gains and losses. Under the assumption that neurons have a limited firing response range, we show that mitigating the ensuing information loss within artificial neural networks that synthetize value involves a specific form of self-organized plasticity. We demonstrate that the ensuing efficient value synthesis mechanism induces value range adaptation. We also reveal how the ranges of prospective gains and/or losses eventually determine both the behavioral sensitivity to gains and losses and the information content of the network. We test these predictions on two fMRI datasets from the OpenNeuro. org initiative that probe gamble decision-making but differ in terms of the range of gain prospects. First, we show that peoples' loss aversion eventually adapts to the range of gain prospects they are exposed to. Second, we show that the strength with which the orbitofrontal cortex (in particular: Brodmann area 11) encodes gains and expected value also depends upon the range of gain prospects. Third, we show that, when fitted to participant's gambling choices, self-organizing artificial neural networks generalize across gain range contexts and predict the geometry of information content within the orbitofrontal cortex. Our results demonstrate how self-organizing plasticity aiming at mitigating information loss induced by neurons' limited response range may result in value range adaptation, eventually yielding irrational behavior. [ABSTRACT FROM AUTHOR]

Small farmers in low-and-middle-income countries are disproportionately affected by uncertainties under which they have to make decisions. However, decision-making may not be purely rational as it could be influenced by affective or emotional states. Compared to integral mood, there are few studies investigating whether incidental mood influences farmers' monetary decisions under uncertainty. This paper applies the Cumulative prospect theory (CPT) model to determine farmers' attitudes under uncertainty and examines the association with farmers mood, measured by direct elicitation during an experimental session. Participants (farmers) were mostly uncertainty averse in the gain domain. In contrast, farmers were uncertainty-seeking for losses. A one-way ANOVA was conducted to examine the differences between groups in sad, neutral and happy mood states, followed by posthoc tests to determine which groups differed from each other. The results revealed statistically significant differences in uncertainty aversion, loss aversion, and the parameters representing how probabilities are perceived and weighted, i.e., sad, neutral and happy in the gain domain. However, there was an absence of a relationship between incidental mood and several CPT parameters in the loss domain. The paper highlights how understanding the association between mood and attitudes can be harnessed for a better quality of decision-making in various contexts. This finding has important implications for agricultural contexts where farmers often face uncertain outcomes and must make choices that involve potential gains and losses. Since the transfer of incidental moods to decision making is usually done unconsciously, it is crucial to eliminate or reduce the impact of negative moods on decision-making, especially where the outcome is likely to be suboptimal. [ABSTRACT FROM AUTHOR]

The Hungarian Royal Gendarmerie was definitively dissolved in 1945 due to its complicity in war crimes. Previously, during the era of the Austro- Hungarian Empire, opposition parties, despite differing political views, sought the dissolution of the Transylvanian gendarmerie, viewing it as a symbol of Habsburg oppression since 1849. Following the end of the Hungarian Revolution and War of Independence of 1848-1849, many revolutionaries fled to Turkish territories, where they were under the protection of the sultan. During this time, the young ethnographer Balázs Orbán also arrived in the Ottoman Empire to resolve matters related to family inheritance. The young Transylvanian baron's relationship with the revolutionaries significantly influenced his political conduct and career. The purpose of this study is to examine the extent and nature of the aversion toward the gendarmerie in Balázs Orbán’s political conduct, as well as to explore any possible changes over time, considering the various reforms of the gendarmerie. A statement from local press may also be included in the examination of Balázs Orbán’s opposition to the gendarmerie, and more broadly, the current state of public safety. The author argues that one should not reject the gendarmerie solely because it was initiated by the government; instead, it is essential to consider the changes the gendarmerie brought to the region’s public safety. The conclusion of the study suggests that separating Balázs Orbán’s different roles – as the ethnographer who left behind significant academic work on Szeklerland and as the parliamentarian demonstrating specific political behavior – may prove beneficial. [ABSTRACT FROM AUTHOR]

The use of artificial intelligence (AI) in operational decision‐making is growing, but individuals can display algorithm aversion, preventing adherence to AI system recommendations—even when the system outperforms human decision‐makers. Understanding why such algorithm aversion occurs and how to reduce it is important to ensure AI is fully leveraged. While the ability to seek an explanation from an AI may be a promising approach to mitigate this aversion, there is conflicting evidence on their benefits. Based on several behavioral theories, including Bayesian choice, loss aversion, and sunk cost avoidance, we hypothesize that if a recommendation is perceived as an anomalous loss, it will decrease recommendation adherence; however, the effect will be mediated by explanations and differ depending on whether the advisor providing the recommendation and explanation is a human or an AI. We conducted a survey‐based lab experiment set in the online rental market space and found that presenting a recommendation as a loss anomaly significantly reduces adherence compared to presenting it as a gain, however, this negative effect can be dampened if the advisor is an AI. We find explanation‐seeking has a limited impact on adherence, even after considering the influence of the advisor; we discuss the managerial and theoretical implications of these findings. [ABSTRACT FROM AUTHOR]

We provide evidence that classic lottery anomalies like probability weighting and loss aversion are not special phenomena of risk. They also arise (and often with equal strength) when subjects evaluate deterministic, positive monetary payments that have been disaggregated to resemble lotteries. Thus, we find, e.g., apparent probability weighting in settings without probabilities and loss aversion in settings without scope for loss. Across subjects, anomalies in these deterministic tasks strongly predict the same anomalies in lotteries. These findings suggest that much of the behavior motivating our most important behavioral theories of risk derive from complexity-driven mistakes rather than true risk preferences. (JEL C91, D44, D81, D91) [ABSTRACT FROM AUTHOR]

Project leaders are responsible for planning, controlling, and revising projects. As a project unfolds, the leader evaluates the project's progress by comparing ongoing costs and scope to a baseline plan and considers potential revisions. We offer a general model of managerial mental accounting, which includes loss aversion, reference point updating, and narrow framing, and examine how it impacts downstream decisions. Our model predicts insufficient adjustments of project scope and cost at revision, resulting in reduced financial profit. We show that the choice of measure to quantify the project progress—planned, actual, or earned—affects the updating of reference points, and hence the downstream decisions. Thus, progress measures could be wisely employed to mitigate insufficient adjustments. It turns out that measuring progress via planned scope is often advantageous, whereas utilizing earned value for cost is never advisable. This paper was accepted by David Simchi-Levi, behavioral economics and decision analysis. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2021.02929. [ABSTRACT FROM AUTHOR]

Problem definition: Despite extensive research on buyback contracts in supply chain management, little attention has been given to a direct comparison between a traditional full-quantity, partial-credit (FQ) buyback contract and an alternative full-credit, partial-quantity (FC) contract, especially when considering the behavioral biases of the retailer. This study aims to fill this research gap by exploring how these biases influence contract performance and offer practical guidelines for suppliers. Methodology/results: Through controlled laboratory experiments and structural model estimation, we show that the ordering decisions made by human retailers are jointly affected by three behavioral biases—loss aversion, prospective accounting, and psychological cost of inventory error—and these biases differ in magnitude between the two contracts. Incorporating these biases into a behavioral retailer's utility function, we then analytically examine which buyback policy the supplier should choose. When the wholesale price is exogenously given, the supplier should adopt the FC contract for high-margin (low-cost) products. Conversely, when the supplier has the power to set both the wholesale and buyback prices, the FC contract is generally more beneficial for low-margin products. Finally, when the product cost is sufficiently high, a wholesale price contract may be advantageous over buyback policies. Managerial implications: The managerial implication of this paper is significant for suppliers who have to choose between different buyback policies. The paper suggests that the supplier should carefully consider not just the economic, but also the behavioral dimensions when making contract decisions, particularly when dealing with a retailer influenced by behavioral biases. Specifically, the choice between FQ and FC contracts is influenced by two key environmental factors: the production cost of the product and the nature of wholesale pricing. Understanding these elements allows suppliers to be flexible in contract choices and design appropriate return policies for their downstream supply chain partners. Funding: P. Yu was supported by the National Natural Science Foundation of China [Grants 72371038 and 72033003] and the Fundamental Research Funds for the Central Universities [Grant 2024CDJSKPT16]. T. Feng was supported by the National Natural Science Foundation of China [Grant 72131004]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2023.0574. [ABSTRACT FROM AUTHOR]

This study examines how investors incorporate unrealized gains or losses reported in Other Comprehensive Income (OCI) into their investment judgments. Since unrealized gains or losses can be presented in either OCI or net income—gains from trading securities are included in net income, while those from available-for-sale securities are reported in OCI (ASC 320 and ASC 851)—it raises the question of whether OCI items are perceived as equally significant as net income items. To explore this, we conducted a 2 × 2 experiment with 240 individual investors, manipulating the presentation of unrealized gains or losses in either net income or OCI. Our findings reveal that unrealized gains are valued significantly lower when presented in OCI compared to net income, indicating that investors see OCI-reported gains as less relevant. However, for unrealized losses, the incorporation degree remained consistent across both presentations, reflecting a general aversion to unrealized losses regardless of how they are reported. [ABSTRACT FROM AUTHOR]

This study aims to investigate the interaction between market volatility, economic growth, and cognitive biases over the period from April 2006 to March 2024. Market volatility and economic growth are critical indicators that influence economic stability and investment behavior. Financial market volatility, defined by abrupt and erratic changes in asset values, can have a big impact on the expansion and stability of the economy. According to conventional economic theory, there should be an inverse relationship between market volatility and economic growth since high volatility can discourage investment and erode trust. Market participants' cognitive biases are a major aspect that complicates this connection. Due to our innate susceptibility to cognitive biases, including herd mentality, overconfidence, and loss aversion, humans can make poor decisions and increase market volatility. These prejudices frequently cause investors to behave erratically and irrationally, departing from reasonable expectations and causing inefficiencies in the market. Cognitive biases have the capacity to sustain feedback loops, which heighten market turbulence and may hinder economic expansion. Similarly, cognitive biases have the potential to cause investors to misread economic indicators or ignore important details, which would increase volatility. This study uses the generalized autoregressive conditional heteroskedasticity (GARCH) model on GDP growth data from the US, the UK, and India, alongside S&P 500, FTSE 100, and NIFTY 50 data sourced from Bloomberg, to examine evidence of these biases. The results show evidence of the predictive nature of market fluctuations on economic performance across the markets and highlight the substantial effects of cognitive biases on market volatility, disregarding economic fundamentals and growth, emphasizing the necessity of considering psychological factors in financial market analyses and developing strategies to mitigate their adverse effects. [ABSTRACT FROM AUTHOR]

We introduce Cautious Utility, a new model based on the idea that individuals are unsure of trade‐offs between goods and apply caution. The model yields an endowment effect, even when gains and losses are treated symmetrically. Moreover, it implies either loss aversion or loss neutrality for risk, but in a way unrelated to the endowment effect, and it captures the certainty effect, providing a novel unified explanation of all three phenomena. Cautious Utility can help organize empirical evidence, including some that directly contradicts leading alternatives. [ABSTRACT FROM AUTHOR]

We study the Tullock contest model with loss aversion and endogenously formed reference points. In a contest with n possibly heterogeneous players and convex effort costs, we establish sufficient conditions for a unique Nash equilibrium in pure strategies. Subsequently, we analyze the impact of loss aversion on players' spending behavior, probability of winning, and rent dissipation. [ABSTRACT FROM AUTHOR]

The article delves into the complex relationship between promoting educational excellence and educational justice, emphasizing the need to balance the development of abilities at different levels. It suggests that decision-making in education should prioritize the instrumental value of developing abilities, with non-instrumental values as secondary considerations. The text contains a variety of academic articles and book chapters covering topics such as schooling impact on executive function, educational justice for the gifted, and the value of excellence, offering diverse perspectives on talent advancement, intelligence, and equality in education. [Extracted from the article]

This research aims to investigate the influence of behavioral finance on stock investment decision-making in Indonesia, considering both rational and irrational behaviors. Key behavioral finance factors, including overconfidence, herding bias, mental accounting, and loss aversion, are examined to understand their impact on stock investment decisions, the financial literacy as moderating variables has been added to the model. A self-administered questionnaires were distributed to 391 active trading stock investor in Indonesia. Using Partial Least Squares method, the results shows that loss aversion and overconfidence negatively influence the investment decision. Further, the analysis confirmed the role of financial literacy as moderating variable for mental accounting and overconfidence. It is also consistent with the notion that financial literacy at least in terms of mental accounting biases under some conditions might actually reinforce certain specific cognitive shortcuts. This study’s results suggest policymakers and financial educators should work to increase investors’ literacy about finance, as well as their ability to identify biases they hold which could be used against them when making investment decisions.

The editorial "Sports, economics, and natural experiments: advances and retrospection" published in Frontiers in Behavioral Economics explores how sports serve as a unique field laboratory for behavioral microeconomics research. The document highlights studies that leverage natural experiments in sports, measure productivity using sports data, and replicate existing findings. Examples include research on the impact of rest differentials on NFL team performance, an experimental rule change in the League of Ireland, and the trade-off between fitness and experience in One Day International cricket. The editorial emphasizes the importance of using sports as a platform for testing economic theories and understanding the implications of findings for various industries. [Extracted from the article]

Abstract Loss aversion is a psychological construct defined as a tendency to value potential losses more than gains in a situation that requires decision-making. The Loss Aversion Scale (LAS, eight items) measures an individual’s loss aversion to various situations. However, the generalization of its psychometric properties to different population groups is unknown. This study aimed to validate the LAS instrument for use among Spanish university adults. To this end, two studies were conducted: a content validity study calculating the substantive validity (N = 24) of the instrument’s translation from original English to Spanish and a study of internal structure and association (N = 766) among Spanish university men and women aged 18–35. The analyses performed for each sample indicated that the instrument had adequate validity and reliability values as a one-dimensional measure; however, items 5 and 8 had to be removed. Their scores indicated moderate-magnitude correlations with social desirability. This article debates the study’s limitations, practical implications, and future lines of research based on the results. The conclusion is that the Loss Aversion Scale instrument suits general Spanish population samples and requires probable methodological control concerning social desirability.

Highlights: What are the main findings? The reference point λ and loss averse degree k have different effects on the game equilibrium. What is the implication of the main finding? Consumer loss aversion is introduced into a Stackelberg game between NEVs and FVs. Real market data are used for simulation and validation. Compared to the development history of traditional FVs (fossil-fuel vehicles), although NEVs (new-energy vehicles) have many advantages and huge development potential, they are still in the early stages of development. The current research about NEV diffusion mainly focuses on policies, competition, and cooperation with FVs, as well as consumer-related factors, in which consumers are generally assumed as rational. In order to study the impact of irrational consumer factors on NEV diffusion, this study takes the prospect theory into consideration. Through a literature analysis, the loss-aversion factor is introduced to establish a Stackelberg game model, in which the FV market is the leader and the NEV market is the follower. A backward induction method is used to solve the optimal decision strategy of each party in the game, and the Python Sympy library is employed for calculation and simulation. The results show that as the loss-aversion reference point λ increases, the price, demand, and profit of NEVs increase, while the price, demand, and profit of FVs decrease, and their sum profit also shows a downward trend. While, as the loss-aversion degree k increases, the price, demand, and profit of NEVs decrease, while the price, demand, and profit of FVs increase, and their sum profit also shows an upward trend. [ABSTRACT FROM AUTHOR]

In financial markets, irrational behaviors such as hyperbolic discounting and panic selling are prevalent. However, their widespread empirical associations remain unexplored. Numerous behavioral theories discuss how cognitive biases exacerbate panic selling through the lens of immediate loss aversion, a phenomenon in which individuals exhibit impulsive decision-making tendencies due to an intense fear of financial loss during market upheaval. Despite the theoretical elucidation, empirical investigations of these dynamics are lacking. Using a robust dataset comprising 121,293 active investors sourced from a collaborative effort between Hiroshima University and Rakuten Securities Inc., this study used mean comparison tests and probit regression to analyze hyperbolic discounting's role in panic selling behavior on the global COVID-19 financial crisis. The findings reveal that hyperbolic discounting plays a central role in triggering investors' impulsive panic selling behavior, which is driven primarily by fear of potential losses. Other factors that influence panic selling behavior include age, male gender, low education level, financial literacy, household income, household assets, risk aversion, and overconfidence in financial knowledge. Our study explicates the need to address cognitive biases in financial decision making during market crises through strategies such as targeted financial education, regulatory interventions against market manipulation, and the provision of professional advice to investors. [ABSTRACT FROM AUTHOR]

Individuals were found to anonymously predict positive election outcomes for their preferred candidate. Yet, there is little scientific knowledge about election predictions made in the context of same-camp political communications (i.e., partisan communications) that are presumably meant to encourage other supporters. In five studies of low-information elections and a study of hypothetical U.S. elections (n = 1889), we found that people tended to communicate favorable forecasts to others sharing their view, compared to the neutral point and to the actual election outcomes. On the other hand, negative framing reduced the positivity of forecasts in these communications to the extent that it led most participants to predict an election loss. This occurred in response to a single addressee acting discordantly and even more strongly when the election results were phrased as a drop. When both positive and negative framing options were available, this still negativity affected participants' predictions even though only a minority selected the negative framing option. Thus, people tend to make optimistic election predictions in partisan communications, but this pattern is easily manipulable given subtle changes in the forecasting prompt, either by negative framing or selectable positive and negative framing. [ABSTRACT FROM AUTHOR]

The paper deals with behavioural finance as a stream of finance challenging the principles of classical finance by adding psychology to the reasons that could explain observed anomalies within financial markets and which, at the same time, are caused by real human behaviour. The aim of this paper is to explore investors' behavioural, biases and their disturbances of rationality, focusing mostly on the factors of loss aversion, cultural influences, and overconfidence, and how these elements influence investment decisions. It is based on empirical data and behavioural experiments, which help to show how such biases deviate from efficient market theories; this work also tests some methods that can mitigate these negative effects, therefore providing insights on how to integrate the teaching of behavioural finance more effectively into the decision-making process of investors and experts within finance. Precisely, this work is aimed at attempting to provide a model of psychological behaviour for Moroccan investors, based on an investigation carried out in the field among 93 regular investors in the Casablanca Stock Exchange. The main findings of the study underline how behavioural biases deviate from predictions by efficient market theories. This paper has only focused on the specific context of Moroccan investors, yet giving insight into how psychological factors impact investment decisions through new insights into life where these financial behaviours take place. There is, hence, uniqueness to the research through the theoretical and practical approaches integrated therein, with the use of empirical data and behavioural experiments that sustain the discussion on behavioural finance. Presenting the case of Moroccan investors adds a significant contribution to proposing a context-specific model, which may bring important implications for financial decision-making within the region. [ABSTRACT FROM AUTHOR]

Accounting conservatism has been described as deriving from preferences for reporting errors to be in the direction of understatement rather than overstatement. We pair reporters with users (who rely on reporters' information) in a multiperiod experiment. We posit that, under misaligned incentives that motivate aggressive reporting, users view aggressive reports as reflecting exploitative intent and expect that a norm prohibiting aggressive reporting applies. We predict that users use noisy reporting errors to gauge reporters' norm compliance. We find that, ceteris paribus, users prefer not to be paired with reporters producing overstatement errors likely to reflect aggressive reporting relative to reporters producing understatement errors likely to reflect conservative reporting; alternatively, we find no such asymmetric preferences when the agents' motives are aligned. The asymmetric preferences cannot be explained by agency theory predictions of payoff maximization or loss aversion. These moral preferences provide an initial condition from which conservatism can endogenously emerge. Data Availability: Data are available from the authors upon request. JEL Classifications: B52; D81; D82; M41. [ABSTRACT FROM AUTHOR]

We develop and implement methods for determining whether introducing new securities or relaxing investment constraints improves the investment opportunity set for prospect investors. We formulate a new testing procedure for prospect spanning for two nested portfolio sets based on subsampling and linear programming. In an application, we use the prospect spanning framework to evaluate whether well-known anomalies are spanned by standard factors. We find that of the strategies considered, a few of them expand the opportunity set of the prospect type investors and thus have real economic value for them and involve absence of loss aversion. Those are the net stock issue anomaly under the FF-5 model, the momentum and net stock issue anomalies under the M-4 model, and the momentum anomaly under the q model. In-sample and out-of-sample results prove remarkably consistent in identifying genuine anomalies for prospect investors. This paper was accepted by Will Cong, finance. Supplemental Material: The data and online appendix are available at https://doi.org/10.1287/mnsc.2023.4953. [ABSTRACT FROM AUTHOR]

Introduction: Previous empirical research in the social sciences suggests sizable differences across religious denominations for various outcomes of interest, such as educational attainment, marital stability, wealth, or fertility. A small body of previous experimental literature has investigated possible differences in economic preference parameters (including time preference and risk attitude) between religious denominations that might explain those differences. Methods: This research adds to the extant literature on religion and preferences by including information on subjects' Big Five personality traits and analyzing potential correlations with loss aversion. It combines experimental data from incentivized choices with information on religious affiliation during high school and Big Five personality traits to test for possible correlations of religious denomination with risk attitude, time preference, and loss aversion, using Bayesian analysis of variance (ANOVA) and Bayesian regression analysis. Results: Bayesian ANOVA results suggest no preference differences between the religions analyzed in this research. When controlling for Big Five personality traits and a host of other background variables, Bayesian regression results suggest no effects of either religious affiliation or Big Five personality traits measures on the three economic preference parameters analyzed here. Discussion: These findings highlight the complexity of the relationship between religion, personality traits, and economic preference parameters, suggesting that previously observed differences may be influenced by the preference measures used or other unobserved factors. [ABSTRACT FROM AUTHOR]

Utilizing a national individual‐level medical dataset and the home bias phenomenon in investment, our study shows a strong and robust link between declines in local stock returns and increased antidepressant consumption among investors. This effect intensifies in areas with higher per capita dividend income, suggesting a direct relationship between higher stock ownership and stronger responses. We confirm that portfolio losses, not local economic conditions, are responsible for increased antidepressant usage during market downturns. Using the frequency of psychotherapy sessions yields similar findings. Moreover, our study supports the loss aversion hypothesis as we find positive stock returns do not influence antidepressant usage. [ABSTRACT FROM AUTHOR]

This study explores the complex interplay between extrinsic and intrinsic factors influencing human behavior in various contexts, including the stock market, with a focus on the impact of cognitive and emotional biases on investment decisions. Against the backdrop of modern finance theories, which assume market efficiency and rational investor decision-making, this research aims to investigate the effects of overconfidence, loss aversion, and herd behavior on investor choices. Utilizing a mixed-methods approach, combining theoretical frameworks from prospect theory and behavioral finance, this study examines the ways in which these biases lead to suboptimal decisions, undermine market efficiency, and contribute to market trends and anomalies, including momentum effects and bubbles. The key findings of this research reveal that cognitive and emotional biases significantly impact investment decisions, and that understanding and regulating these biases can improve market predictions and regulation. The study's policy and business implications are significant, as its insights can inform the development of more effective investor education programs, risk management strategies, and regulatory frameworks, ultimately leading to more informed decision-making and stable financial markets. [ABSTRACT FROM AUTHOR]

This research paper examines the behavioral factors influencing investment choices among salaried individuals in Mumbai. By identifying key psychological biases and preferences, this study aims to provide insights into the decision-making processes of investors. The findings can help financial advisors and policymakers develop strategies to enhance investment outcomes for salaried employees. [ABSTRACT FROM AUTHOR]

Loss aversion is a psychological construct defined as a tendency to value potential losses more than gains in a situation that requires decision-making. The Loss Aversion Scale (LAS, eight items) measures an individual’s loss aversion to various situations. However, the generalization of its psychometric properties to different population groups is unknown. This study aimed to validate the LAS instrument for use among Spanish university adults. To this end, two studies were conducted: a content validity study calculating the substantive validity (N = 24) of the instrument’s translation from original English to Spanish and a study of internal structure and association (N = 766) among Spanish university men and women aged 18–35. The analyses performed for each sample indicated that the instrument had adequate validity and reliability values as a one-dimensional measure; however, items 5 and 8 had to be removed. Their scores indicated moderate-magnitude correlations with social desirability. This article debates the study’s limitations, practical implications, and future lines of research based on the results. The conclusion is that the Loss Aversion Scale instrument suits general Spanish population samples and requires probable methodological control concerning social desirability. [ABSTRACT FROM AUTHOR]

In the context of big data, pricing discrimination in global tourism expands the potential for reputational harm due to readily available information influencing tourists' decision-making processes. This phenomenon also impacts the selection tactics of market entities, raising concerns about shared market value loss. By applying the value co-creation theory, wherein consumers and businesses collaborate to generate value, understanding the dynamics between businesses and tourists, as well as the motivations behind price discrimination, becomes more accessible. Furthermore, this study explores price discrimination behavior in the tourism market through the lens of value co-creation, employing a combination of prospect theory and mental accounting theory (PT-MA). Through the development of an evolutionary game model encompassing tourists, tourism enterprises, and the government, strategic decisions made by these stakeholders are analyzed. Besides, simulation and the in-depth examination of the model's evolution using Matlab software reveal several key findings: (1) tourists tend to opt for compromise strategies due to their aversion to transactional costs associated with complaints; (2) reputational loss and sensitivity to loss aversion are inversely related to the likelihood of enterprises engaging in price discrimination; and (3) proactive and effective regulatory measures by the government prove successful in curtailing price discrimination in the tourism market, whereas fine policies demonstrate less efficacy. This study contributes to establishing a theoretical framework for selecting strategies aimed at achieving value co-creation in tourism. [ABSTRACT FROM AUTHOR]

People tasked with replacing a departing group member are disproportionately likely to choose a replacement with the same demographic identity, leading to demographic "stickiness" in group composition. We examine this effect in 2,163 U.S. federal judge appointments over 75 years, in the selection of 5,616 S&P 1500 board directors from 2014 to 2019, and in four preregistered experiments (n = 2,900). The patterns we document are generally consistent with both impact aversion (desires to minimize changes to group composition and dynamics) and diversity loss aversion (outsized concerns about losing ground on demographic diversity relative to interests in gaining ground). Ultimately, our results suggest that replacement decisions are influenced by loss-averse preferences regarding the demographic identities of departing group members. The propensity to choose new group members based on whether they demographically resemble their predecessors suggests that once progress toward diversification has occurred, it should be "sticky," so backsliding is less likely than might otherwise be expected. An optimistic outlook is that one-time interventions to change group composition may have a lasting impact, and change agents committed to diversification may have enduring effects on equality beyond their tenure. This paper was accepted by Yuval Rottenstreich, behavioral economics and decision analysis. Supplemental Material: The data files and online supplement are available at https://doi.org/10.1287/mnsc.2023.4897. [ABSTRACT FROM AUTHOR]

This study investigates the influence of herding behavior, loss aversion, and availability on investment decision-making among Generation Z, with Fear of Missing Out (FoMO) as a mediator. Generation Z frequently relies on social media as a primary source of investment information, potentially leading to biases or decision-making errors. The research was conducted among a group studying capital markets in Semarang, employing purposive sampling to gather data from 251 respondents through Google Form questionnaires. Data analysis using Smart PLS 4.0 revealed that herding behavior does not significantly affect FoMO or investment decision-making among Generation Z. However, loss aversion and information availability significantly influence both investment decision-making and FoMO among Generation Z. FoMO does not mediate the relationship between herding behavior and investment decisions, but it does mediate the impact of loss aversion and information availability on investment decisions among Generation Z.

IntroductionThis paper evaluates an experimental rule change trialed in the League of Ireland for one season in the early 1980s, where four points were awarded for an away win, three for a home win, two for an away draw, and one for a home draw. This pay-off structure was designed to incentivize visiting teams to engage in more offensive play, thus potentially increasing the number of goals scored per game and reducing the incidence of drawn games.MethodsUsing match-level data for six playing seasons, the impact of this reward scheme on an array of match-level outcomes is evaluated using an array of fixed effects regression models.Results and discussionThe key empirical findings suggest this change to the pay-off structure did not reduce the drawn game rate but did induce a modest increase in the average goal scoring of the home team with subsequent implications for average goal difference. The absence of an effect for the visiting team is rationalized in terms of prospect theory, and the asymmetric implication of the policy change for the respective loss aversion parameters of the home and the visiting teams. In addition, we also use a lottery framework to further demonstrate why the short-lived pay-off structure failed in its primary objective to incentivize visiting teams to engage in more offensive play.

Abstract Traditional methods for evaluating decision-making provide valuable insights yet may fall short in capturing the complexity of this cognitive capacity, often providing insufficient for the multifaceted nature of decisions. The Kalliste Decision Task (KDT) is introduced as a comprehensive, ecologically valid tool aimed at bridging this gap, offering a holistic perspective on decision-making. In our study, 81 participants completed KDT alongside established tasks and questionnaires, including the Mixed Gamble Task (MGT), Iowa Gambling Task (IGT), and Stimulating & Instrumental Risk Questionnaire (S&IRQ). They also completed the User Satisfaction Evaluation Questionnaire (USEQ). The results showed excellent usability, with high USEQ scores, highlighting the user-friendliness of KDT. Importantly, KDT outcomes showed significant correlations with classical decision-making variables, shedding light on participants’ risk attitudes (S&IRQ), rule-based decision-making (MGT), and performance in ambiguous contexts (IGT). Moreover, hierarchical clustering analysis of KDT scores categorized participants into three distinct profiles, revealing significant differences between them on classical measures. The findings highlight KDT as a valuable tool for assessing decision-making, addressing limitations of traditional methods, and offering a comprehensive, ecologically valid approach that aligns with the complexity and heterogeneity of real-world decision-making, advancing research and providing insights for understanding and assessing decision-making across multiple domains.