psychological channels underlying such a bias is scarce. We present a laboratory experiment designed to investigate the sunk cost …-stage investment task in which an initial investment needs to be made to start a project. In the initial investment stage, the size of … the investment and the responsibility of the investor are exogenously varied. In the second investment stage, participants …

We experimentally test overconfidence in investment decisions by offering participants the possibility to substitute … their own for alternative investment choices. Overall, 149 subjects participated in two experiments, one with just one risky …

effect. We show that loss aversion, moral costs, mental accounting, and risk preferences play a key role in explaining key … that risk aversion strengthens the cautionary effect of loss aversion and risk loving behavior attenuates, or reverses, it …

The theory of expected utility maximization (EUM) proposed by Bernoulli explains risk aversion as a consequence of … from the terms offered; and subjects often appear to be too risk averse with regard to small gambles (while still accepting … from judgments based on imprecise (and noisy) mental representation of the decision situation. In this model, risk aversion …

In an experiment that elicits subjects' willingness to pay (WTP) for the outcome of a lottery, we confirm the fourfold … pattern of risk attitudes described by Kahneman and Tversky. In addition, we document a systematic effect of stake sizes on … the magnitude and sign of the relative risk premium, holding fixed both the probability that a lottery pays off and the …

experiment, reduces evasion, as predicted by our theory. Loss aversion, risk aversion, and their interaction, are critical …