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Discussion Paper Details

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Title: ?At least I didn?t lose money? Nominal Loss Aversion Shapes Evaluations of Housing Transactions

Author(s): Thomas A Stephens and Jean-Robert Tyran

Publication Date: October 2012

Keyword(s): bounded rationality, housing transactions, loss aversion and money illusion

Programme Area(s): Financial Economics and Public Economics

Abstract: Loss aversion is one of the most robust findings to have emerged from behavioral economics. Surprisingly little attention, however, has been devoted to nominal loss aversion, the interaction of loss aversion and money illusion. People tend to think of transactions in terms of their nominal (monetary) values. Real losses may therefore loom larger in people?s minds when they lose money than when real losses are hidden by purely nominal gains. Using a survey experiment with a large and heterogeneous sample, we show that evaluations of housing transactions are systematically biased by purely nominal gains versus losses.

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Bibliographic Reference

Stephens, T and Tyran, J. 2012. '?At least I didn?t lose money? Nominal Loss Aversion Shapes Evaluations of Housing Transactions'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9198