Loss aversion

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

How Do Intentions Affect Loss Aversion

Abstract: Previously (see Novemsky and Kahneman 2005), the authors proposed that intentions to exchange versus to consume a good moderate loss aversion for that good. In this rejoinder, the authors follow up on this idea, discussing several mechanisms that Ariely, Huber, and Wertenbroch (2005) propose by which intentions can moderate loss aversion. The authors consider both emotional attachment to the good and cognitive focus during evaluation as potential mediators of the effects of intentions on loss aversion.

Causes, consequences, and cures of myopic loss aversion - an experimental investigation

Abstract: We examine in an experiment the causes, consequences and possible cures of myopic loss aversion (MLA) for investment behaviour under risk. We find that both, investment horizons and feedback frequency contribute almost equally to the effects of MLA. Longer investment horizons and less frequent feedback lead to higher investments. However, when given the choice, subjects prefer on average shorter investment horizons and more frequent feedback. Exploiting the status quo bias by setting a long investment horizon or low feedback frequency as a default turns out to be a successful behavioural intervention that increases investment levels.

Loss aversion without the endowment effect, and other explanations for the WTA–WTP disparity

Abstract: To learn why WTA regularly exceeds WTP in economic experiments involving inexpensive market goods with ample substitutes, the verbal protocol technique was used in a real cash experiment employing a random price auction. Results suggest that the primary reason for the disparity was subjects’ reluctance to suffer a net loss from any transaction, whether purchase or sale, and tendency to consider sale much below assumed market price as a loss. This interpretation indicates a kind of loss aversion, but not the kind envisioned in the endowment effect, which maintains that selling creates a loss and buying creates a gain.

A Psychological Law of Inertia and the Illusion of Loss Aversion

Abstract: The principle of loss aversion is thought to explain a wide range of anomalous phenomena involving tradeoffs between losses and gains. In this article, I show that the anomalies loss aversion was introduced to explain - the risky bet premium, the endowment effect, and the status quo bias - are characterized not only by a loss/gain tradeoff, but by a tradeoff between the status quo and change; and, that a propensity towards the status quo in the latter tradeoff is sufficient to explain these phenomena. Moreover, I show that two basic psychological principles - (1) that motives drive behavior; and (2) that preferences tend to be fuzzy and ill-defined - imply the existence of a robust and fundamental propensity of this sort. Thus, a loss aversion principle is rendered superfluous to an account of the phenomena it was introduced to explain.