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Abstract

This study measures risk and loss aversion using Prospect Theory and the impact of emotions on those parameters. Our controlled experiment at two universities in Mexico City, using uncompensated students as research subjects, found results similar to those obtained by Tanaka et al. 2010. In order to study the role of emotions, we provided subjects with randomly varied information on rising deaths due to drug violence in Mexico and also on youth unemployment. In agreement with previous studies, we find that risk aversion on the gains domain decreases with age and income. We also find that loss aversion decreases with income and is less for students in public universities. With regard to emotions, risk aversion increases with sadness and loss aversion is negatively influenced by anger. On the loss domain, anger dominates sadness. On average, anger reduces loss aversion by half.



Item Type: MPRA Paper -

Original Title: The Role of Emotions on Risk Aversion: A prospect theory experiment-

Language: English-

Keywords: Risk Aversion; Emotions; Prospect Theory; Experiment; Mexico-

Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C93 - Field ExperimentsD - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying PrinciplesD - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical AnalysisO - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic DevelopmentO - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O54 - Latin America ; Caribbean-





Author: Campos-Vazquez, Raymundo M.

Source: https://mpra.ub.uni-muenchen.de/48280/



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