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  3. American Economic Review
  4. May 2015
  5. Deciding When to Quit: Reference-Dependence over Slot Machine Outcomes

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

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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.

Citation

Lien, Jaimie W., and Jie Zheng. 2015. "Deciding When to Quit: Reference-Dependence over Slot Machine Outcomes." American Economic Review, 105 (5): 366-70. DOI: 10.1257/aer.p20151036

JEL Classification

  • D12 Consumer Economics: Empirical Analysis
  • D81 Criteria for Decision-Making under Risk and Uncertainty
  • L83 Sports; Gambling; Restaurants; Recreation; Tourism