Presentation Title

Factors that Influence Whether Choices are Consistent with Loss Aversion

Abstract

Research suggests that decision making is an important, often-overlooked determinant of human health. Loss aversion describes the propensity to prefer avoiding losses over obtaining equivalent gains. Risk aversion denotes the tendency to avoid options that entail a risk of loss when choosing between alternatives. In two experiments, I examined loss aversion and other decision-making variables. In Experiment 1, club sport athletes and non-athletes at the University of Vermont completed measures of loss aversion, risk aversion, delay discounting, and probability discounting. Groups were compared to assess the hypothesis that athletes are less loss averse and risk averse than non-athletes. The results suggest that the populations do not differ in their levels of delay or probability discounting. Athletes were slightly less loss averse than non-athletes, but this difference was not statistically significant. However, athletes were significantly 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 the ranges were reversed in Phase 2. I hypothesized that the participants would accept gambles in a manner consistent with loss aversion, except in Phase 2, where Group ABA’s loss aversion would disappear. The results supported my hypotheses; the 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.

Primary Faculty Mentor Name

Eric A. Thrailkill

Status

Undergraduate

Student College

College of Arts and Sciences

Program/Major

Psychological Science

Primary Research Category

Social Sciences

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Factors that Influence Whether Choices are Consistent with Loss Aversion

Research suggests that decision making is an important, often-overlooked determinant of human health. Loss aversion describes the propensity to prefer avoiding losses over obtaining equivalent gains. Risk aversion denotes the tendency to avoid options that entail a risk of loss when choosing between alternatives. In two experiments, I examined loss aversion and other decision-making variables. In Experiment 1, club sport athletes and non-athletes at the University of Vermont completed measures of loss aversion, risk aversion, delay discounting, and probability discounting. Groups were compared to assess the hypothesis that athletes are less loss averse and risk averse than non-athletes. The results suggest that the populations do not differ in their levels of delay or probability discounting. Athletes were slightly less loss averse than non-athletes, but this difference was not statistically significant. However, athletes were significantly 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 the ranges were reversed in Phase 2. I hypothesized that the participants would accept gambles in a manner consistent with loss aversion, except in Phase 2, where Group ABA’s loss aversion would disappear. The results supported my hypotheses; the 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.