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Individuals’ decisions under risk tend to be in line with the notion that“losses loom larger than gains.” This loss aversion in decision making is commonly understood as a stable individual preference that is manifested across different contexts. The presumed stability and generality, which underlies the prominence of loss aversion in the literature at large, has been recently questioned by studies reporting how loss aversion can disappear, and even reverse, as a function of the choice context. The present study investigated whether loss aversion re ects a trait-like attitude of avoiding losses or rather individuals’ adaptability to different con- texts. We report three experiments investigating the within-subject context sensitivity of loss aversion in a two-alternative forced-choice task. Our results show that the choice context can shift people’s loss aversion, though somewhat inconsistently. Moreover, individual estimates of loss aversion are shown to have a con- siderable degree of stability. Altogether, these results indicate that even though the absolute value of loss aversion can be affected by external factors such as the choice context, estimates of people’s loss aversion still capture the relative dispositions toward gains and losses across individuals.
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Behavioral preferences and contract choice in the residential solar PV market
Abstract Greater adoption of renewable energy technologies by households is a key component of decarbonization and energy transition goals. Although existing literature has examined how sociodemographic characteristics, “green” preferences, and peer effects impact adoption of new energy technology, the role of behavioral preferences has not been adequately studied. In this paper, we examine the effect of two types of behavioral preferences, namely the degree of risk tolerance (risk preference) and attitude toward delayed reward (time preference) on the contract decision to lease or own a solar photovoltaic (PV) system. We develop a theoretical framework to show that the effect of risk and time preferences on the relative utilities from the two contracts is monotonic: Lower risk aversion and lower discount rate (more patience) imply a higher chance of solar PV ownership. To test these predictions empirically, we first estimate preference parameters (risk aversion and discount rate) from laboratory data collected from solar PV adopters. We then combine the parameter estimates with data on actual solar PV contract choice to examine the relationship between solar PV adopters' time and risk preferences and their lease‐versus‐own choice. Our regression results confirm that less risk averse individuals have a higher tendency to choose the ownership option, whereas more patient individuals are (weakly) more likely to own their solar PV systems. These findings contribute to a greater understanding of the role of behavioral factors in household decisions related to energy technologies.
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- Award ID(s):
- 2020888
- PAR ID:
- 10545524
- Publisher / Repository:
- Wiley
- Date Published:
- Journal Name:
- American Journal of Agricultural Economics
- ISSN:
- 0002-9092
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
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- Free Publicly Accessible Full Text
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Accepted Manuscript1.0
- Journal Article:
- https://doi.org/10.1111/ajae.12487
