Myopic Loss Aversion In Groups

Last registered on October 28, 2024
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Pre-Trial

Trial Information

General Information

Title
Myopic Loss Aversion In Groups
RCT ID
AEARCTR-0014598
Initial registration date
October 28, 2024

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
October 28, 2024, 1:44 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
October 28, 2024, 4:30 PM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Country
United States of America
Region
Texas

Primary Investigator

Name
Paul Feldman
Affiliation
Texas A&M University
Contact Primary Investigator

Other Primary Investigator(s)

Additional Trial Information

Status
On going
Start date
2024-09-20
End date
2024-11-08
Keywords
Behavior, Finance & Microfinance
Additional Keywords
JEL code(s)
D81, G11, C92
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
Most people instinctively chase losses, hoping to recover them—a behavior called myopic loss aversion, where we focus on immediate losses over long-term gains. Our study explored whether groups show this same bias using an investment game. Participants played individually and in pairs across two scenarios: one group faced their losses after each round, while the other continued without directly confronting losses. All participants first played alone, making investment choices with real money at stake, then played in pairs with collective decision-making. We expect to find myopic loss aversion in both individual and group settings, though with varying intensity.
External Link(s)

Registration Citation

Citation
Feldman, Paul. 2024. "Myopic Loss Aversion In Groups." AEA RCT Registry. October 28. https://doi.org/10.1257/rct.14598-1.1
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
Intervention (Hidden)
Intervention Start Date
2024-10-01
Intervention End Date
2024-11-08

Primary Outcomes

Primary Outcomes (end points)
The main outcome is the amount invested in a risky option during each round of decision-making. This is a continuous variable measured as the proportion of the participant's endowment allocated to a risky investment.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
The experiment employs a mixed design where participants engage in decision-making tasks both individually and in groups. Participants are assigned to one of two loss conditions: paper losses (hypothetical losses not immediately realized) or realized losses (actual losses that affect their budget). The experiment is conducted over multiple rounds, with each participant initially making individual investment decisions, followed by rounds in a group setting.
Participants begin by making investment decisions in four rounds under either the paper or realized loss condition. Each round presents them with the option to invest a portion of their endowment in a risky lottery with a known probability of success and failure. The amount invested in the lottery is the key variable, and the payoff structure is clearly defined to simulate realistic financial decisions. Following these rounds, participants are randomly paired into groups of two, and the experiment is repeated for an additional four rounds. Groups are allowed to communicate with each other, and they must reach a consensus on their investment decisions.
The experiment design allows for a within-subject comparison between individual and group decisions, as well as a between-subject comparison of the effects of realized versus paper losses. By comparing investment behavior before and after group interaction, the experiment seeks to isolate the effects of social dynamics on MLA. The group interaction component, which involves open communication between participants, is critical in testing whether groups can collectively mitigate the impact of MLA, leading to more rational, long-term decision-making.
Experimental Design Details
Randomization Method
randomization done in office by a computer
Randomization Unit
The primary randomization unit is the individual participant, and there is an additional layer of randomization when participants are assigned to groups of 2 for the group decision-making rounds.
Was the treatment clustered?
Yes

Experiment Characteristics

Sample size: planned number of clusters
85 groups
Sample size: planned number of observations
We aim to recruit approximately 170 participants.
Sample size (or number of clusters) by treatment arms
85 for both paper loss and realized loss treatment
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
IRB - TAMU CS
IRB Approval Date
2024-08-06
IRB Approval Number
STUDY2024-0846
Analysis Plan

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Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials