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David Gal (2006) argued that many of the phenomena commonly attributed to loss aversion, including the status quo bias, the endowment effect, and the preference for safe over risky options, are more parsimoniously explained by psychological inertia than by a loss/gain asymmetry. Gal and Rucker (2018) made similar arguments.
The leading explanation for the aforementioned WTP-WTA gap is that of loss aversion. It was first linked by Kahneman and his colleagues that selling an endowment means the loss of the object, and as humans are aligned to be more loss-averse , less utility is obtained from acquirement of the same endowment. [ 4 ]
The loss aversion explanation for the status quo bias has been challenged by David Gal and Derek Rucker who argue that evidence for loss aversion (i.e., a tendency to avoid losses more than to pursue gains) is confounded with a tendency towards inertia (a tendency to avoid intervention more than to intervene in the course of affairs). [23]
Begala’s case is that loss aversion can be used in non-inflation contexts to make Americans realize that the results of the 2024 election could mean losses for them in things like abortion ...
When it comes to money, it always helps to take a step back, acknowledge your emotions and weigh the risks and rewards. Hear an expert's take on 8 common mindsets that could be holding you back ...
Daniel Kahneman, who won the 2002 Nobel Memorial Prize in Economics for his work developing prospect theory. Prospect theory is a theory of behavioral economics, judgment and decision making that was developed by Daniel Kahneman and Amos Tversky in 1979. [1]
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Loss aversion, where the perceived disutility of giving up an object is greater than the utility associated with acquiring it. [ 74 ] (see also Sunk cost fallacy ) Pseudocertainty effect , the tendency to make risk-averse choices if the expected outcome is positive, but make risk-seeking choices to avoid negative outcomes.