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  Investment in education under disappointment aversion

Anderberg, D., & Cerrone, C. (2016). Investment in education under disappointment aversion.

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Item Permalink: http://hdl.handle.net/11858/00-001M-0000-002B-B26D-9 Version Permalink: http://hdl.handle.net/21.11116/0000-0003-FDFF-2
Genre: Paper

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 Creators:
Anderberg, Dan, Author
Cerrone, Claudia1, Author              
Affiliations:
1Max Planck Institute for Research on Collective Goods, Max Planck Society, ou_2173688              

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Free keywords: education; risk; disappointment aversion; endogeneous reference points
 JEL: D03 - Behavioral Microeconomics: Underlying Principles
 JEL: D81 - Criteria for Decision-Making under Risk and Uncertainty
 JEL: I21 - Analysis of Education
 Abstract: This paper develops a model of risky investment in education under disappointment aversion, modelled as loss aversion around one's endogenous expectation. The model shows that disappointment aversion reduces the optimal investment in education for lower ability people and increases it for higher ability people, thereby magnifying the investment gap between them generated by the riskiness of education. Policies aimed at influencing students' expectations can reduce early dropout.

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 Dates: 2016
 Publication Status: Published online
 Pages: 10
 Publishing info: Bonn : Max Planck Institute for Research on Collective Goods,, Discussion Paper 2016/16
 Table of Contents: -
 Rev. Type: -
 Identifiers: Other: 2016/16
 Degree: -

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