Questions About The Existence of Loss Aversion
Recently, studies have questioned the existence of loss aversion. In several studies examining the effect of losses in decision making under risk and uncertainty no loss aversion was found. There are several explanations for these findings: one, is that loss aversion does not exist in small payoff magnitudes; the other, is that the generality of the loss aversion pattern is lower than that thought previously. Finally, losses may have an effect on attention but not on the weighting of outcomes; as suggested, for instance, by the fact that losses lead to more autonomic arousal than gains even in the absence of loss aversion.
Loss aversion may be more salient when people compete. Gill and Prowse (2012) provide experimental evidence that people are loss averse around reference points given by their expectations in a competitive environment with real effort.
Loss aversion and the endowment effect are often confused. Gal (2006) argued that the endowment effect, previously attributed to loss aversion, is more parsimoniously explained by inertia than by a loss/gain asymmetry.
Read more about this topic: Loss Aversion
Famous quotes containing the words questions, existence, loss and/or aversion:
“Philosophical questions are not by their nature insoluble. They are, indeed, radically different from scientific questions, because they concern the implications and other interrelations of ideas, not the order of physical events; their answers are interpretations instead of factual reports, and their function is to increase not our knowledge of nature, but our understanding of what we know.”
—Susanne K. Langer (1895–1985)
“Creation destroys as it goes, throws down one tree for the rise of another. But ideal mankind would abolish death, multiply itself million upon million, rear up city upon city, save every parasite alive, until the accumulation of mere existence is swollen to a horror.”
—D.H. (David Herbert)
“Every farewell combines loss and new freedom.”
—Mason Cooley (b. 1927)
“Our aversion to lying is commonly a secret ambition to make what we say considerable, and have every word received with a religious respect.”
—François, Duc De La Rochefoucauld (1613–1680)