Work

The role of «perceived loss» aversion on credit screening: An experiment

Year: 2013

Type: article

Abstract: A major characteristic of credit markets is information asymmetry. To combat its problems, as credit rationing, principals can use a menu of contracts to screen clients with different risk level. We conduct a laboratory experiment to address an important question for such settings—does the framing of the offered menu of contracts interfere with the self-selection mechanism? The answer is yes. We find subjects' choices shift when the same (positive) outcomes of the same menu of contracts are presented in two different frames. Subjects exhibit loss aversion in their perception of the positive outcomes below the reference point, and self-selection fails to occur.

Source: Spanish Journal of Finance and Accounting / Revista Española de Financiación y Contabilidad

DOI: 10.1080/02102412.2013.10779741

Authors: Benoit Bediou, Irene Comeig, Ainhoa Jaramillo-Gutiérrez, David Sander

Institutions: University of Geneva, Universitat de València

Language: Spanish

Topic: Decision-Making and Behavioral Economics

Subfield: General Decision Sciences

Field: Decision Sciences

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2082584789

FWCI: 0.243

Cites: 39

Cited by: 6

Related to: 10