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Loss aversion

About: Loss aversion is a research topic. Over the lifetime, 2898 publications have been published within this topic receiving 115198 citations.


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Journal ArticleDOI
TL;DR: This article found that participants' willingness to pay more attention to the "gap-fillers" and ready-made scripts that individuals bring to every task when compared to the implicit norms associated with transactions.

24 citations

Posted Content
TL;DR: This work formalizes the silver lining effect by showing analytically that if the gain is smaller than a certain threshold, segregation is optimal, and shows that the degree of loss aversion of the decision maker decreases with the size of the loss.
Abstract: The silver lining effect predicts that segregating a small gain from a larger loss results in greater psychological value than does integrating them into a smaller loss. Using a generic prospect theory value function, we formalize this effect and derive conditions under which it should occur. We show analytically that if the gain is smaller than a certain threshold, segregation is optimal. This threshold increases with the size of the loss and decreases with the degree of loss aversion of the decision maker. Our formal analysis results in a set of predictions suggesting that the silver lining effect is more likely to occur when (i) the gain is smaller (for a given loss), (ii) the loss is larger (for a given gain), and (iii) the decision maker is less loss averse. We test and confirm these predictions in two studies of preferences, both in a nonmonetary and a monetary setting, analyzing the data in a hierarchical Bayesian framework.

24 citations

Journal ArticleDOI
TL;DR: The authors show that loss-averse agents are more likely to lie to avoid receiving a low payoff after a random draw, the lower the ex-ante probability of this bad outcome.
Abstract: We theoretically show that loss-averse agents are more likely to lie to avoid receiving a low payoff after a random draw, the lower the ex-ante probability of this bad outcome. The ex-ante expected payoff increases as the bad outcome becomes less likely, and hence the greater is the loss avoided by lying. We demonstrate robust support for this theory by reanalyzing the results from the extant literature and with two new experiments that vary the outcome probabilities and are run doubleanonymous to remove reputation effects. To measure lying, we develop an empirical method that estimates the full distribution of dishonesty

24 citations

Journal ArticleDOI
TL;DR: The authors examined whether the compensation demanded is convex, concave, neither, or both in the number of items being relinquished, concluding that loss aversion implies concavity of willingness to accept, whereas the utility-theoretic explanation implies convexity.
Abstract: The disparity between willingness-to-pay and willingness-to-accept, also known as compensation demanded, is a robust experimental finding. Two types of explanations been proposed. The first invokes psychological effects, broadly categorized as reference dependence and loss aversion. The second explanation is that there are large substitution effects but that underlying behavior is neoclassically utility-theoretic. The key observation motivating the present study is that loss aversion implies concavity of willingness to accept, whereas the utility-theoretic explanation implies convexity. We report experiments in which subjects were endowed with 3 items and asked the minimum payments they required to be willing to relinquish 1, 2, or 3 of them. We examine whether the compensation demanded is convex, concave, neither, or both in the number of items being relinquished.

24 citations

Posted Content
TL;DR: Tanaka et al. as discussed by the authors measured risk and loss aversion using Prospect Theory and the impact of emotions on those parameters, finding that risk aversion on the gains domain decreases with age and income.
Abstract: This study measures risk and loss aversion using Prospect Theory and the impact of emotions on those parameters. Our controlled experiment at two universities in Mexico City, using uncompensated students as research subjects, found results similar to those obtained by Tanaka et al. (2010). In order to study the role of emotions, we provided subjects with randomly varied information on rising deaths due to drug violence in Mexico and also on youth unemployment. In agreement with previous studies, we find that risk aversion on the gains domain decreases with age and income. We also find that loss aversion decreases with income and is less for students in public universities. With regard to emotions, risk aversion increases with sadness and loss aversion is negatively influenced by anger. On the loss domain, anger dominates sadness. On average, anger reduces loss aversion by half.

24 citations


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Performance
Metrics
No. of papers in the topic in previous years
YearPapers
2023105
2022178
2021178
2020184
2019189
2018197