Expectation-based loss aversion and strategic interaction

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper provides a comprehensive analysis regarding strategic interaction under expectation-based loss-aversion. First, we develop a coherent framework for the analysis by extending the equilibrium concepts of Kőszegi and Rabin (2006, 2007) to strategic interaction and demonstrate how to derive equilibria. Second, we delineate how expectation-based loss-averse players differ in their strategic behavior from their counterparts with standard expected-utility preferences. Third, we analyze equilibrium play under expectation-based loss aversion and comment on the existence of equilibria. Terms of use: Documents in EconStor mayJEL classification: C72, D01, D03, D81 Keywords: Non-Cooperative Games, Expectation-Based Loss Aversion, Reference-Dependent Preferences, Mixed Strategies * We thank Armin Falk, Paul Heidhues, Fabian Herweg, Daniel Krähmer, Matthias Kräkel, Simone Quercia, and Matthew Rabin for helpful comments and suggestions. Furthermore, we have benefited from comments made by the seminar audience at the University of Bonn. All errors are of course our own.

Bandwagons in costly elections: The role of loss aversion

“…they are compatible with the decision rules adopted by the other citizens. Hence, due to strategic interaction, we apply pure strategy choice-acclimating personal Nash equilibria defined by Dato et al (2017), where each citizen plays a CPE given other citizens' behaviour. 12 Definition: A choice-acclimating personal Nash equilibrium (CPNE) is a strategy profile…”

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“…This is a common assumption used in literature (see Kőszegi 2008, 2014;Rosato 2016;Grillo 2016;Dato et al 2017Dato et al , 2018 Daido and Tajika (2022). consider diminishing returns of gain-loss utility and ideological concerns (in Online Appendix B) to explain the relation between election closeness and abstention rates.…”

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The evolution of research and development cooperation in dynamically interorganizational project networks: Effects of reference‐point‐based expectations

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