Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/148906
Authors: 
Anderberg, Dan
Cerrone, Claudia
Year of Publication: 
2016
Series/Report no.: 
Preprints of the Max Planck Institute for Research on Collective Goods 2016/16
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.
Subjects: 
education
risk
disappointment aversion
endogeneous reference points
JEL: 
D03
D81
I21
Document Type: 
Working Paper

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