Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/234918 
Year of Publication: 
2020
Series/Report no.: 
ISER Discussion Paper No. 1106
Publisher: 
Osaka University, Institute of Social and Economic Research (ISER), Osaka
Abstract: 
Based on unique panel data from a five-wave internet survey in Japan, we show how the coronavirus disease 2019 pandemic affected people's prospect-theory risk preferences, especially in the loss domain. The panel analysis indicates that with the spread of the pandemic, diminishing sensitivity becomes stronger for the participants' value and probability weighting functions. Thus, due to the pandemic, (i) people become less sensitive to an increase in losses and feel less paindue to losses, especially large ones; and (ii) they become more pessimistic towards tail loss risks, and more optimistic towards non-tail loss risks. One implication is that people have become less cautious of the risks of suffering large non-tail losses, which might retard the recovery of society.
Subjects: 
COVID-19
prospect theory
risk
value function
probability weighting function
JEL: 
D90
G40
Document Type: 
Working Paper

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