Expectations-Based Loss Aversion May Help Explain...
summary
Claim: expectations-based loss aversion explains why many people submit seemingly dominated rankings in strategy-proof matching (deferred acceptance / serial dictatorship). Methods: simple reference-dependent theory + reanalysis of a lab dataset (serial dictatorship lab (72 subjects, 10 rounds = 720 obs)) and likelihood estimation. Findings: 19–45% misreport in surveyed studies, 29% misreports in the analyzed data (39% at lowest priority), estimated lambda ≈ 2, and a likelihood ratio ~10^7 favoring the loss‑averse model over classical preferences.
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