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Factors that Influence Whether Choices are Consistent with Loss Aversion
Kafka, Julian
Kafka, Julian
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Abstract
Loss aversion describes the propensity to prefer avoiding losses over obtaining equivalent gains. In two experiments, I examined loss aversion and other decision-making variables. In Experiment 1, club sport athletes and non-athletes completed measures of loss aversion, risk aversion, delay discounting, and probability discounting. Groups were compared to assess the hypothesis that athletes are less loss and risk averse than non-athletes. The samples did not significantly differ in their levels of loss aversion or delay or probability discounting. However, athletes were less risk averse than non-athletes. Experiment 2 examined predictions of loss aversion for different conditions in which the expected values of each choice were manipulated. Two groups received three blocks consisting of 64 hypothetical 50-50 gambles that each presented a potential gain and a potential loss. Participants chose to accept or reject the gamble. For the AAA group, gains ranged from $12 to $40, and losses ranged from $6 to $20 in all three phases. The ABA group experienced the same ranges in Phases 1 and 3 but reversed ranges in Phase 2. I hypothesized that the participants’ choices would be sensitive to the expected value of the gambles and that, independent of the expected value, they would accept gambles in a manner consistent with loss aversion. The results supported my hypotheses. Loss aversion was observed at each test block; however, groups differed systematically in how well their choices matched the predictions of loss aversion. Overall, the results provide new information on the influence of experience on decision making.
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2021-01-01
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THESIS_KAFKA_FINAL.pdf
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