Thinking, Fast and Slow

he conducted on the occasion of taking his father to the Super Bowl: “We
asked fans who had won the right to buy a pair of tickets for $325 or $400
each in a lottery whether they would have been willing to pay $3,000 a
ticket if they had lost in the lottery and whether they would have sold their
tickets if someone had offered them $3,000 apiece. Ninety-four percent
said they would not have bought for $3,000, and ninety-two percent said
they would not have sold at that price.” He concludes that “rationality was in
short supply at the Super Bowl.” Alan B. Krueger, “Supply and Demand: An
Economist Goes to the Super Bowl,” Milken Institute Review : A Journal of
Economic Policy 3 (2001): 22–29.
giving up a bottle of nice wine : Strictly speaking, loss aversion refers to
the anticipated pleasure and pain, which determine choices. These
anticipations could be wrong in some cases. Deborah A. Kermer et al.,
“Loss Aversion Is an Affective Forecasting Error,” Psychological Science
17 (2006): 649–53.
market transactions : Novemsky and Kahneman, “The Boundaries of Loss
Aversion.”
half of the tokens will change hands : Imagine that all the participants are
ordered in a line by the redemption value assigned to them. Now randomly
allocate tokens to half the individuals in the line. Half of the people in the
front of the line will not have a token, and half of the people at the end of the
line will own one. These people (half of the total) are expected to move by
trading places with each other, so that in the end everyone in the first half of
the line has a token, and no one behind them does.
Brain recordings : Brian Knutson et al., “Neural Antecedents of the
Endowment Effect,” Neuron 58 (2008): 814–22. Brian Knutson an {an
utson et ad Stephanie M. Greer, “Anticipatory Affect: Neural Correlates
and Consequences for Choice,” Philosophical Transactions of the Royal
Society B 363 (2008): 3771–86.
riskless and risky decisions : A review of the price of risk, based on
“international data from 16 different countries during over 100 years,”
yielded an estimate of 2.3, “in striking agreement with estimates obtained
in the very different methodology of laboratory experiments of individual
decision-making”: Moshe Levy, “Loss Aversion and the Price of Risk,”
Quantitative Finance 10 (2010): 1009–22.
effect of price increases : Miles O. Bidwel, Bruce X. Wang, and J. Douglas
Zona, “An Analysis of Asymmetric Demand Response to Price Changes:
The Case of Local Telephone Calls,” Journal of Regulatory Economics 8
(1995): 285–98. Bruce G. S. Hardie, Eric J. Johnson, and Peter S. Fader,
“Modeling Loss Aversion and Reference Dependence Effects on Brand
Choice,” Marketing Science 12 (1993): 378–94.