The Loss of Loss Aversion: Will It Loom Larger Than Its Gain?
Accepted by Sharon Shavitt, Associate Editor
The authors gratefully acknowledge helpful comments from Eric Anderson, Jonathan Baron, Bobby Calder, Blake McShane, Brian Sternthal, Christian Wheeler, and Eldad Yechiam. We also thank the editor, Sharon Shavitt, for feedback and guidance.
Abstract
Loss aversion, the principle that losses loom larger than gains, is among the most widely accepted ideas in the social sciences. The first part of this article introduces and discusses the construct of loss aversion. The second part of this article reviews evidence in support of loss aversion. The upshot of this review is that current evidence does not support that losses, on balance, tend to be any more impactful than gains. The third part of this article aims to address the question of why acceptance of loss aversion as a general principle remains pervasive and persistent among social scientists, including consumer psychologists, despite evidence to the contrary. This analysis aims to connect the persistence of a belief in loss aversion to more general ideas about belief acceptance and persistence in science. The final part of the article discusses how a more contextualized perspective of the relative impact of losses versus gains can open new areas of inquiry that are squarely in the domain of consumer psychology.
Number of times cited: 7
- E. Tory Higgins and Nira Liberman, The Loss of Loss Aversion: Paying Attention to Reference Points, Journal of Consumer Psychology, (2018).
- Eldad Yechiam, Acceptable losses: the debatable origins of loss aversion, Psychological Research, (2018).
- Itamar Simonson and Ran Kivetz, Bringing (Contingent) Loss Aversion Down to Earth - A Comment on Gal & Rucker's Rejection of “Losses Loom Larger Than Gains”, Journal of Consumer Psychology, (2018).
- Lara Ezquerra, Gueorgui I. Kolev and Ismael Rodriguez-Lara, Gender differences in cheating: Loss vs. gain framing, Economics Letters, 10.1016/j.econlet.2017.11.016, 163, (46-49), (2018).
- G. Charles-Cadogan, Losses loom larger than gains and reference dependent preferences in Bernoulli’s utility function, Journal of Economic Behavior & Organization, 10.1016/j.jebo.2018.08.007, 154, (220-237), (2018).
- Thomas H. Costello, Sarah F. Smith, Shauna M. Bowes, Steven Riley, Gregory S. Berns and Scott O. Lilienfeld, Risky Business: Psychopathy, Framing Effects and Financial Outcomes, Journal of Research in Personality, 10.1016/j.jrp.2018.11.006, (2018).
- David Gal and Derek D. Rucker, Loss Aversion, Intellectual Inertia, and a Call for a More Contrarian Science: A Reply to Simonson & Kivetz and Higgins & Liberman, Journal of Consumer Psychology, , (2018).
