Comments to the Editor on "The Willingness to Pay for Diversification"

Aleksi Pitkäjärvi, Matteo Vacca

Research output: Contribution to journalArticleScientific

Abstract

Mahmoud [Mahmoud O (2022) The willingness to pay for diversification. Management Sci. 68(8):6235–6249] presents experimental evidence showing that people have an intrinsic preference for diversification that is driven by risk aversion and loss aversion, with risk-averse and loss-averse individuals being more willing to pay for diversification. We document numerous discrepancies between the results reported in the paper and the results calculated from the experimental data. In particular, the data show that risk-averse individuals are actually less willing to pay for diversification, whereas the effect of loss aversion is nonmonotonic and not statistically significant. We thus show that the data do not support the paper’s claim of a preference for diversification driven by risk aversion and loss aversion.
Original languageEnglish
Peer-reviewed scientific journalManagement Science
ISSN0025-1909
DOIs
Publication statusPublished - 19.09.2024
MoE publication typeB1 Journal article

Keywords

  • 512 Business and Management
  • experimental economics
  • diversification
  • risk aversion
  • loss aversion

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