Frequent online poker players with extensive experience calculating probabilities and expected values might be expected to behave as Expected Utility maximizers, in that small shocks to their wealth would not affect risk preferences ( Rabin, 2000 ). By contrast, reference-dependent loss aversion (as in Prospect Theory) ( Koszegi and Rabin, 2006 , Kahneman and Tversky, 1979 ) predicts that risk aversion decreases as wealth moves away from the reference point in either direction. In terms of continuing to play, as well as a more aggressive playing style, we find strong evidence for the break-even effect, the increased pursuit of risk as a player is losing within a session. Players' behavior also appears consistent with existing evidence on reference-dependent labor supply, in their tendency to reduce effort and risk-taking in response to being ahead. Our findings provide evidence for reference-dependent behavior in a flexible, high-skilled setting, under conditions of well-understood monetary risk.

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We study processing and acquisition of objective information regarding qualities that people care about, intelligence and beauty. Subjects receiving negative feedback did not respect the strength of these signals, were far less predictable in their updating behavior and exhibited an aversion to new information. In response to good news, inference conformed more closely to Bayes' Rule, both in accuracy and precision. Signal direction did not affect updating or acquisition in our neutral control. Unlike past work, our design varied direction and agreement with priors independently. The results indicate that confirmation bias is driven by direction; confirmation alone had no effect. (JEL D82, D83)