Topic
Loss aversion
About: Loss aversion is a research topic. Over the lifetime, 2898 publications have been published within this topic receiving 115198 citations.
Papers published on a yearly basis
Papers
More filters
Posted Content•
TL;DR: It is found that measures of subjective well-being are more than twice as sensitive to negative as compared to positive economic growth, providing a new perspective on the welfare cost of business cycles.
Abstract: Are individuals more sensitive to losses than gains in terms of economic growth? Using subjective well-being data, we observe an asymmetry in the way positive and negative economic growth is experienced. We find that measures of life satisfaction and affect are more than twice as sensitive to negative economic growth as compared to positive growth. We use Gallup World Poll data from over 150 countries, BRFSS data on 2.5 million US respondents, and Eurobarometer data that cover multiple business cycles over four decades. This research provides a new perspective on the welfare cost of business cycles and has implications for growth policy and our understanding of the long-run relationship between GDP and subjective well-being.
87 citations
TL;DR: In this paper, a general equilibrium model is proposed to examine the implications of prospect theory for the disposition effect, asset prices, and trading volume of the stock market, which is helpful for understanding a wide range of financial phenomena and also suggests new testable predictions.
86 citations
Posted Content•
TL;DR: In this article, the authors examine the behavior of a large sample of auto buyers using an experiment which allows them to measure loss aversion, at the individual level for several different attributes, and show that knowledge of the attribute lowers loss aversion and that age and attribute importance increases loss aversion.
Abstract: Loss aversion, the fact that losses have a greater impact than gains, is a fundamental property of behavioral accounts of choice. In this paper, we suggest four possible characterizations of the relative impact of losses and gains: (1) It could be a constant, such as the much cited value of 2, as in losses have twice the impact of gains. (2) It could be a systematic individual difference, with some individuals more or less loss aversion, (3) it could be a property of the attribute, or (4) a property of the different processes used to construct selling and buying prices. We examine the behavior of a large sample of auto buyers using an experiment which allows us to measure loss aversion, at the individual level for several different attributes. A set of hierarchical linear models shows that to understand loss aversion, one must consider the process used to construct prices. Interestingly, we show that knowledge of the attribute lowers loss aversion and that age and attribute importance increases loss aversion.
85 citations
Posted Content•
85 citations
TL;DR: In this paper, the authors focus on linear/exponential, power-function and multilinear utility models for decision under uncertainty, and show that constant absolute proportional risk aversion implies linear or exponential power utility.
Abstract: Different attitudes towards gains and losses are a prominent feature of cumulative prospect theory for decision under uncertainty. In particular, decision weights for uncertain events can depend on whether the events involve gains or losses, and the shape of the utility function can reveal loss aversion. Decision analyses concentrate on event capacities, which determine decision weights, and on the shape of the utility function. The present paper focuses on linear/exponential, power-function and multilinear utility models for decision under uncertainty. We begin with straightforward preference axioms for a representation by a cumulative prospect theory functional. The axioms include weak ordering, continuity, monotonicity and tail independence. We show that in their presence constant absolute proportional risk aversion implies linear/exponential power utility. Then, for the multiattribute case, mutual utility independence leads to a utility function that is additive/multiplicative multilinear.
85 citations