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A structural analysis of disappointment aversion in a real effort competition

Abstract:

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. Our theory predicts that a disappointment averse agent, who is loss averse around her endogenous 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 ...

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Publication status:
Published

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Publisher:
University of Oxford
Series:
Department of Economics Discussion Paper Series
Publication date:
2009-09-01
Paper number:
448

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