tag:blogger.com,1999:blog-7905515.post1583082063734678429..comments2024-03-14T11:09:32.759-05:00Comments on Falkenblog: Kahneman Fast and LooseEric Falkensteinhttp://www.blogger.com/profile/07243687157322033496noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-7905515.post-79582566499401722862013-06-14T06:31:54.715-05:002013-06-14T06:31:54.715-05:00Both loss aversion and lottery tickets can be conf...Both loss aversion and lottery tickets can be confirmed by lab experiments, field studies, surveys, purchase behavior, etc. In some ways they're both just "curiosities".<br /><br />But why do lottery tickets persist in equilibrium asset pricing where loss aversion does not?Arrrrgh...noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-23103830403642348782013-06-13T13:10:07.215-05:002013-06-13T13:10:07.215-05:00Could loss-aversion play a non-trivial role in wag...Could loss-aversion play a non-trivial role in wage stickiness? *If* so, then that would certainly elevate its real-world importance.Piyohttps://www.blogger.com/profile/05775346125247800627noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-80137342083914533372013-06-12T22:11:54.702-05:002013-06-12T22:11:54.702-05:00Note that in a world of limited information (such ...Note that in a world of limited information (such as the world we live in), at least some loss aversion is actually rational. In particular, suppose I'm living a comfortable life making $100k per year and saving 10% of it, and face a gamble that would give me a chance of either making $150k per year or $50k per year. Analyzing that under a model of full information and perfect liquidity ignores the fact that if my income is halved, I have to learn how to live on $50k per year, which I may well not know how to do. I may have to move into a smaller place, possibly selling my house more quickly than would give me a reasonable price, and either pay movers or spend a lot of my time moving things, and so forth.<br /><br />I don't think that necessarily explains all of loss aversion, and I'm not sure I can offer a rational explanation for buying lottery tickets, but I do think the gap between the traditional models and reality has more to do with the assumptions of full information and free logistics and less to do with the assumption of perfect rationality than most people appreciate. This might be an effect of my time at Rochester.<br />Stevenhttps://www.blogger.com/profile/06090531523789747157noreply@blogger.com