School of Environment and Natural Resources, Ohio State University.
My Loss Is Your Loss … Sometimes: Loss Aversion and the Effect of Motivational Biases
Article first published online: 28 JUN 2008
© 2008 Society for Risk Analysis
Volume 28, Issue 4, pages 929–938, August 2008
How to Cite
Wilson, R. S., Arvai, J. L. and Arkes, H. R. (2008), My Loss Is Your Loss … Sometimes: Loss Aversion and the Effect of Motivational Biases. Risk Analysis, 28: 929–938. doi: 10.1111/j.1539-6924.2008.01065.x
- Issue published online: 29 JUL 2008
- Article first published online: 28 JUN 2008
- loss aversion;
- motivational biases;
- risk management;
Findings from previous studies of individual decision-making behavior predict that losses will loom larger than gains. It is less clear, however, if this loss aversion applies to the way in which individuals attribute value to the gains and losses of others, or if it is robust across a broad spectrum of policy and management decision contexts. Consistent with previous work, the results from a series of experiments reported here revealed that subjects exhibited loss aversion when evaluating their own financial gains and losses. The presence of loss aversion was also confirmed for the way in which individuals attribute value to the financial gains and losses of others. However, similar evaluations within social and environmental contexts did not exhibit loss aversion. In addition, research subjects expected that individuals who were unknown to them would significantly undervalue the subjects' own losses across all contexts. The implications of these findings for risk-based policy and management are many. Specifically, they warrant caution when relying upon loss aversion to explain or predict the reaction of affected individuals to risk-based decisions that involve moral or protected values. The findings also suggest that motivational biases may lead decisionmakers to assume that their attitudes and beliefs are common among those affected by a decision, while those affected may expect unfamiliar others to be unable to identify and act in accordance with shared values.