This paper studies, both theoretically and experimentally, frame effects in the context of a public good game in which players have to make a costly contribution either i) to achieve or ii) not to lose a non excludable monetary prize. Our protocol leads to public good provision (not deterioration) only if a certain contribution level is achieved. Since both frames differ with respect to the reference point, we use Prospect Theory to derive testable predictions. In particular, Prospect Theory predicts more contribution in the second frame. Our evidence suggests that a) subjects' behavior is highly sensitive to frames and b) the theoretical prediction is confirmed except when the threshold is low. We also estimate the parameters which better suit our experimental evidence, partly confirming previous results in the literature.JEL Classification: C92, D81, H40.

The disposition effect (DE) is a common bias by which investors tend to sell winning assets too soon and hold losing assets too long. We complement the existing evidence in three directions. First, we check whether the DE is robust to realistic features such as transaction costs and competitive payment schemes. Second, by using a gender-balanced design, we check for gender differences. Third, we search for psychological correlates of the DE. We find that the DE is positive and significant in all our treatments. We do not find significant differences across treatments, although transaction costs significantly reduce the propensity to sell both winners and losers. We find somewhat larger DE in women, but this effect is only significant in the second half of the experiment. On the other hand, women are more reluctant to sell losing assets throughout the experiment. Finally, we find that the most significant psychological predictors of the DE are difficulty recognizing one's mistakes and optimism. Subjects scoring high in these traits are less likely to sell at a loss and therefore exhibit a larger DE. Our results provide further suggestive evidence of cognitive dissonance as an important determinant of the DE.

This paper reports the results of an experiment in which probabilistic insurance, as proposed by Kahneman and Tversky (1979), is compared both with full insurance and no insurance. The experimental results conform to the intuitive prediction that risk-averse agents who are indifferent between full insurance and no insurance, will prefer full insurance to probabilistic insurance and probabilistic insurance to no insurance. The first conclusion is incompatible with the predictions of expected utility theory, and the second with Kahneman and Tversky's prospect theory. We also show that Loomes and Sudgen's regret theory can easily accommodate these intuitive results. Copyright Springer-Verlag Berlin/Heidelberg 2006Probabilistic insurance, prospect theory, regret theory,

Experimental evidence suggests that the frequency with which individuals get feedback information on their investments has an effect on their risk-taking behavior. In particular, when they are given information sufficiently often, they take less risks compared with a situation in which they are informed less frequently. We find that this result still holds when subjects do not know the probabilities of the lotteries they are betting upon. We also detect significant gender effects, in that the frequency with which information is disclosed mostly affects male betting behavior, and that males become more risk-seeking after experiencing a loss.

The fact that men trade more than women in financial markets has been attributed to men's overconfidence. However, evidence supporting this view is only indirect. We directly test this conjecture experimentally, by measuring confidence using monetary incentives before participants trade in a simulated market. We find that men are more confident than women in our trading task. Men also trade more, and they hold larger and less diversified portfolios than women. However, we do not find that differences in confidence explain any portion of the gender gap in trading activity. We explore alternative candidate channels such as risk aversion, financial literacy or competitiveness but find that these factors are also unlikely to play a role.