Skip to main navigationSkip to main content
The University of Southampton
EconomicsPart of Economic, Social and Political Science

1006 Structural Analysis of Disappointment Aversion in a Real Effort Competition (D. Gill & V. Prowse)

Discussion Paper 1006, "A Structural Analysis of Disappointment Aversion in a Real Effort Competition", by David Gill & Victoria Prowse

We develop a novel computerized real effort task, based on moving sliders across a screen, to test experimentally whether agents are disappointment averse when they compete in a real effort sequential-move tournament. We predict that a disappointment averse agent, who is loss averse around her endogenous choice-acclimating expectations-based reference point, responds negatively to her rival's effort. We find significant evidence for this discouragement effect, and use the Method of Simulated Moments to estimate the strength of disappointment aversion on average and the heterogeneity in disappointment aversion across the population.

Keynames: Disappointment aversion; Loss aversion; Reference-dependent preferences; Reference point adjustment; Expectations; Tournament; Real effort experiment; Slider task.

JEL Classification: C91; D03.

Useful Downloads

Need the software?PDF Reader
Privacy Settings