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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: In this article, the authors report on an experiment which finds a significant ownership utility effect for a publicly provided good, even though consumers do not have exclusive property rights, and conclude that prospect theory applies to publicly provided goods.
Abstract: Many studies report on a systematic disparity between the willingness to pay for a certain good (WTP) and the willingness to accept retribution payments in exchange for giving up this good (WTA). Thaler [Thaler RH (1980) J Econ Behav Organ 1:39–60] employs prospect theory to explain this disparity. The literature contains two different interpretations of his endowment effect theory. Accordingly, the disparity is caused either by the disutility from parting with one’s endowment and/or by an extra utility from ownership which is not anticipated by individuals who are not endowed with the good. So far, the empirical evidence on the applicability of endowment effect theory is limited to private goods. This paper reports on an experiment which finds a significant ownership utility effect for a publicly provided good. This result indicates that prospect theory applies to publicly provided goods even though consumers do not have exclusive property rights.

15 citations

01 Jan 2017
TL;DR: In this paper, the ANOVA test was applied to determine the risk taking behavioral differences in the two domains toward the loss aversion, and the results showed that investors, when in loss aversion of the gain domain, have a lower risk taking than that of loss aversion in the loss domain.
Abstract: The research objective is to test how much risk investors are willing to take when making their investment associated with the loss aversion, in terms of the risk taking behavior in relation with that of the loss aversion. The later, the loss aversion is treated as the independent variable reviewed from the two sides of the gain and loss domain. When investors are in loss aversion within the gain domain, they tend to have a lower risk taking behavior than that of the loss domain. Such tendency of investor’s behavior differences in those two different domains is described in a hypothetical value function (Kahneman and Tversky, 1979). ANOVA Test is applied to determine the risk taking behavioral differences in the two domains toward the loss aversion. Hypothesis test results with the alpha index indicate that investors, when in the loss aversion of the gain domain, have a lower risk taking than that of the loss aversion in the loss domain. Meanwhile, using post hoc for significant test results in that the loss aversion has a significant influence for the risk taking decision making in investment, particularly in that of the stocks.

15 citations

Journal ArticleDOI
TL;DR: Gneezy et al. as mentioned in this paper re-examine this trade-off in a workplace lab environment and find that, in line with theory, principals increase fixed pay while lowering performance pay when the relationship between effort and output is noisier.
Abstract: Despite its central role in the theory of incentives, empirical evidence of a trade-off between risk and incentives remains scarce. We reexamine this trade-off in a workplace lab environment and find that, in line with theory, principals increase fixed pay while lowering performance pay when the relationship between effort and output is noisier. Unexpectedly, agents produce substantially more in the noisy environment than in the baseline despite weaker incentives. In addition, principals’ earnings are significantly higher in the noisy environment. We show that these findings can be accounted for when agents maximize a non-CARA utility function or when they exhibit loss aversion. Data and the online appendix are available at https://doi.org/10.1287/mnsc.2017.2914. This paper was accepted by Uri Gneezy, behavioral economics.

15 citations

Journal ArticleDOI
TL;DR: It is concluded that rank effects are, at least in part, responsible for the loss aversion seen in the accept−reject task.
Abstract: The assumption that losses loom larger than gains is widely used to explain many behavioral phenomena in judgment and decision-making. It is also generally accepted that loss aversion is a stable, traitlike individual difference characterizing people’s sensitivity to gains and losses. This interpretation was recently challenged by Walasek and Stewart (2015), who showed that by manipulating the range of the gains and losses used in the accept−reject task it is possible to find loss aversion, loss neutrality, and a reversal of loss aversion. Here, we reexamined the claim that these context effects arise as a result of people being sensitive to the rank position of a given gain among other gains and the rank position of a loss among other losses. We used skewed distributions of outcomes to manipulate the rank position of gains and losses while keeping the range of possible outcomes constant. We found a small but robust effect of skew on the propensity to accept mixed gambles. We compared the sizes of skew and range effects and found that they are of similar magnitude but that the range effects are smaller than those reported by Walasek and Stewart. We were able to attenuate loss aversion, but we were not able to replicate Walasek and Stewart’s reversal of loss aversion. We conclude that rank effects are, at least in part, responsible for the loss aversion seen in the accept−reject task.

15 citations

Journal ArticleDOI
TL;DR: The authors showed that cognitive abilities are negatively associated with noisy, inconsistent choices and this effect may make higher ability individuals appear to be less risk averse and more loss averse, and that errors are more likely to appear when the two payoffs in a given decision exhibit similar probability.

15 citations


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