Loss Aversion and Health Behaviors: Results from Two Incentivized Economic Experiments

Experimental research in health economics has analyzed the effects of economic preference parameters such as risk attitude and time preference on the probability of adopting risky health behaviors. However, the existing evidence is mixed and previous research often fails to include controls for other determinants of health behaviors such as personality traits. The aim of this research is to analyze the relationships between an incentivized measure of loss aversion and three health behaviors: smoking, binge drinking, and engaging in physical activity. Loss aversion is a preference measure that has been derived from prospect theory as an alternative approach to analyze decision-making under risk, such as the decision to invest in health capital, and has never been used in an analysis of the determinants of health behaviors before. Using two experimental samples of college students in the Republic of Korea and the United States of America, and controlling for Big Five personality traits and a host of individual-level control variables, there are no statistically significant relationships between loss aversion and the three aforementioned health behaviors, but relationships for Big Five conscientiousness, extraversion, agreeableness, and neuroticism. A candidate explanation might be lack of domain independence for loss aversion. Differences between the Korean and the US samples indicate the possibility of intercultural differences.