Loss Aversion and Rent-Seeking: An Experimental Study

Xiaojing Kong

No 2008-13, Discussion Papers from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham

Abstract: We report an experiment designed to evaluate the impact of loss aversion on rent-seeking contests. We find, as theoretically predicted, a negative relationship between rent-seeking expenditures and loss aversion. However, for any degree of loss aversion, levels of rent-seeking expenditure are higher than predicted. Moreover, we find that the effect of loss aversion becomes weaker with repetition of the contest.

Date: 2008-10
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