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Reference Dependent Preference towards Risk: Evidence from the U.S. Professional Golf Tour
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2019 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

The standing debate regarding how preferences should be defined is still evident in research today. Are they invariant to current endowment as a neoclassical practitioner would proclaim, or reference dependent as a behavioural economist would state? This theoretical discrepancy, regarding how preferences should be defined, when agents are experienced at what they do is found by List (2003) to be non-existing. In recollection of this notation, this thesis investigates how professional agents adopt risk in reference to a point that a neoclassical practitioner would deem irrational. With data on professional golf players on the U.S professional golf tour during 2013-2018, I find evidence that players respond in terms of what risk they adapt to a normatively irrelevant reference point in accordance to what Prospect Theory would predict. Indicating that even experienced agents have reference dependent preference towards risk. To give what the data proclaim a causal interpretation I adopt a quasi-experimental regression kink design. My estimates indicate a causal kink at my artificial threshold but are proven fragile to bandwidth alterations. Even though a causal claim is questionable, a sensitivity analysis finds evidence that my artificial threshold drives the relationship. Supporting the viewpoint that preferences towards risk are reference dependent and that experience does not eradicate the difference between what we do and what we should do.

Place, publisher, year, edition, pages
2019. , p. 30
Keywords [en]
Behavioral Economics, Prospect Theory, Risk Preferences
Keywords [sv]
Beteendeekonomi, Prospect Theory, Riskpreferenser
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-388396OAI: oai:DiVA.org:uu-388396DiVA, id: diva2:1333009
Subject / course
Economics
Educational program
Master Programme in Economics
Supervisors
Examiners
Available from: 2019-07-01 Created: 2019-06-29 Last updated: 2019-07-01Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
  • ieee
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Output format
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