Absolute and Relative Stability of Loss Aversion Across Contexts

Mikhail S. Spektor, David Kellen, Jörg Rieskamp, Karl Christoph Klauer

Research output: Contribution to journalArticlepeer-review

Abstract

Individuals’ decisions under risk tend to be in line with the notion that “losses loom larger than gains.” This loss aversion in decision making is commonly understood as a stable individual preference that is manifested across different contexts. The presumed stability and generality, which underlies the prominence of loss aversion in the literature at large, has been recently questioned by studies reporting how loss aversion can disappear, and even reverse, as a function of the choice context. The present study investigated whether loss aversion reflects a trait-like attitude of avoiding losses or rather individuals’ adaptability to different contexts. We report three experiments investigating the within-subject context sensitivity of loss aversion in a two-alternative forced-choice task. Our results show that the choice context can shift people’s loss aversion, though somewhat inconsistently. Moreover, individual estimates of loss aversion are shown to have a considerable degree of stability. Altogether, these results indicate that even though the absolute value of loss aversion can be affected by external factors such as the choice context, estimates of people’s loss aversion still capture the relative dispositions toward gains and losses across individuals.

Original languageEnglish (US)
Pages (from-to)454-472
Number of pages19
JournalJournal of Experimental Psychology: General
Volume153
Issue number2
DOIs
StatePublished - Dec 7 2023

Keywords

  • computational modeling
  • context effects
  • loss aversion
  • prospect theory
  • risky choice

ASJC Scopus subject areas

  • Experimental and Cognitive Psychology
  • General Psychology
  • Developmental Neuroscience

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