Deciding for Future Selves Reduces Loss Aversion

Abstract

In this paper, we present an incentivized experiment to investigate the degree of loss aversion when people make decisions for their current selves and future selves under risk. We find that when participants make decisions for their future selves, they are less loss averse compared to when they make decisions for their current selves. This finding is consistent with the interpretation of loss aversion as a bias in decision-making driven by emotions, which are reduced when making decisions for future selves. Our findings endorsed the external validity of previous studies on the impact of emotion on loss aversion in a real world decision-making environment.

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