American Economic Review Vol. 105 No. 5 2015

Deciding When to Quit: Reference-Dependence over Slot Machine Outcomes

Jaimie W. Lien¹; Jie Zheng²

¹ Department of Decision Sciences and Managerial Economics, The Chinese University of Hong Kong, Shatin, New Territories, Hong Kong, and Department of Economics, School of Economics and Management, Tsinghua University, Beijing, China, 100084 (e-mail: ) · ² Department of Economics, School of Economics and Management, Tsinghua University, Beijing, China, 100084 (e-mail: )

Abstract

We conduct tests for reference dependent loss aversion using slot machine gamblers' decisions on when to quit playing for a visit to a casino. Evidence for a lagged status-quo reference point is found in the aggregate, while endogenously determined reference points are found when conditioning on betting intensity choices. Significant deviations from the distributions implied by random quitting support the loss aversion and diminishing sensitivity hypotheses.

DOI

10.1257/aer.p20151036

Volume

105

Issue

5

Pages

366-370

Language

en

Sources

bibtex:phds-export.bib openalex crossref

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