scholarly journals Acceptance of mixed gambles is sensitive to the range of gains and losses experienced, and estimates of lambda (λ) are not a reliable measure of loss aversion: Reply to André and de Langhe (2020).

2021 ◽  
Vol 150 (12) ◽  
pp. 2666-2670
Author(s):  
Lukasz Walasek ◽  
Timothy L. Mullett ◽  
Neil Stewart
Keyword(s):  
Loss Aversion ◽  
Reliable Measure ◽  
Gains And Losses

scholarly journals A regret-based route choice model with asymmetric preference in a stochastic network

2018 ◽  
Vol 10 (8) ◽  
pp. 168781401879323
Author(s):  
Lei Zhao ◽  
Hongzhi Guan ◽  
Xinjie Zhang ◽  
Xiongbin Wu
Keyword(s):  
Loss Aversion ◽  
Equilibrium Model ◽  
Choice Model ◽  
User Equilibrium ◽  
Stochastic User Equilibrium ◽  
Regret Minimization ◽  
Route Network ◽  
Travel Decision ◽  
Gains And Losses ◽  
Random Regret Minimization

In this study, a stochastic user equilibrium model on the modified random regret minimization is proposed by incorporating the asymmetric preference for gains and losses to describe its effects on the regret degree of travelers. Travelers are considered to be capable of perceiving the gains and losses of attributes separately when comparing between the alternatives. Compared to the stochastic user equilibrium model on the random regret minimization model, the potential difference of emotion experienced induced by the loss and gain in the equal size is jointly caused by the taste parameter and loss aversion of travelers in the proposed model. And travelers always tend to use the routes with the minimum perceived regret in the travel decision processes. In addition, the variational inequality problem of the stochastic user equilibrium model on the modified random regret minimization model is given, and the characteristics of its solution are discussed. A route-based solution algorithm is used to resolve the problem. Numerical results given by a three-route network show that the loss aversion produces a great impact on travelers’ choice decisions and the model can more flexibly capture the choice behavior than the existing models.

scholarly journals Toward an Understanding of the Welfare Effects of Nudges: Evidence from a Field Experiment in the Workplace

2020 ◽  
Vol 130 (632) ◽  
pp. 2329-2353
Author(s):  
Erwin Bulte ◽  
John A List ◽  
Daan van Soest
Keyword(s):  
Field Experiment ◽  
Loss Aversion ◽  
Welfare Effects ◽  
Social Scientists ◽  
Welfare Costs ◽  
Gains And Losses ◽  
Commitment Device

Abstract Social scientists have recently explored how framing of gains and losses affects productivity. We conducted a field experiment in peri-urban Uganda, and compared output levels across 1,000 workers over isomorphic tasks and incentives, framed as either losses or gains. We find that loss aversion can be leveraged to increase the productivity of labour. The estimated welfare costs of using the loss contract are quite modest—perhaps because the loss contract is viewed as a (soft) commitment device.

scholarly journals Gain-Loss Asymmetry in Delay and Effort Discounting of Different Amounts

2021 ◽  
Author(s):  
Szymon Bartłomiej Mizak ◽  
Paweł Ostaszewski ◽  
Przemysław Marcowski ◽  
Wojciech Białaszek
Keyword(s):  
Delay Discounting ◽  
Loss Aversion ◽  
Cognitive Effort ◽  
Physical Effort ◽  
P Loss ◽  
Effort Discounting ◽  
Gain Loss ◽  
Gains And Losses ◽  
Intertemporal Choices

Loss aversion entails the attribution of greater weight to losses than to equivalent gains. In terms of discounting, it is reflected in a higher rate for gains than for losses. Research on delay discounting indicates that such gain-loss asymmetry may depend on the amount of the outcome. In the current study, we address the question of how gains and losses are discounted in delay or effort conditions (physical or cognitive) across four outcome amounts. Our results replicate previous findings for intertemporal choices by showing that losses are discounted more slowly than gains, but only for smaller amounts, while there is no evidence of asymmetry in the evaluation for larger amounts. For physical effort discounting, we found an inverse asymmetry for the smallest amount tested (gains are discounted less steeply than losses), while such an effect is absent for larger amounts. Our results provide no support for the asymmetric evaluation of gains and losses for cognitive effort. Overall, our findings indicate that loss aversion may not be as pervasive as one might expect, at least when decisions are effort-based.

scholarly journals Loss aversion does disappear and reverse, although estimates of lambda (λ) are not reliable: Reply to André and De Langhe

2020 ◽  
Author(s):  
Lukasz Walasek ◽  
Timothy L Mullett ◽  
Neil Stewart
Keyword(s):  
Prospect Theory ◽  
Measurement Invariance ◽  
Loss Aversion ◽  
Choice Data ◽  
General Issue ◽  
Choice Proportion ◽  
Choice Sets ◽  
The Common ◽  
Gains And Losses

Walasek and Stewart (2015) demonstrated that loss aversion estimated from fitting accept-reject choice data from a set of 50/50 gambles can be made to disappear or even reverse by manipulating the range of gains and losses experienced in different conditions. André and de Langhe (2020) critique this conclusion because in estimating loss aversion on different choice sets, Walasek and Stewart (2015) have violated measurement invariance. They show, and we agree, that when loss aversion is estimated on the choices common to all conditions there is no difference in prospect theory’s λ parameter. But there are two problems here. First, while there are no differences in λs across conditions, there are very large differences in the proportion of the common gambles that are accepted, which André and de Langhe chose not to report. These choice proportion differences are consistent with decision by sampling (but are inconsistent with prospect theory or any of the alternative mechanisms proposed by André and de Langhe, 2020). Second, we demonstrate a much more general issue related to the issue of measurement invariance: that λ estimated from the accept-reject choices is extremely unreliable and does not generalise even across random splits within large, balanced choice sets. It is therefore not possible to determine whether differences in choice proportions are due to loss aversion or to a bias in accepting or rejecting mixed gambles. We conclude that context has large effects on the acceptance of mixed gambles and that it is futile to estimate λ from accept-reject choices.

scholarly journals No group differences in Traditional Economics Measures of loss aversion and framing effects in bipolar I disorder

PLoS ONE ◽  
2021 ◽  
Vol 16 (11) ◽  
pp. e0258360
Author(s):  
Zachary Anderson ◽  
Kim Fairley ◽  
Cynthia M. Villanueva ◽  
R. McKell Carter ◽  
June Gruber
Keyword(s):  
Decision Making ◽  
Behavioral Economics ◽  
Loss Aversion ◽  
Framing Effects ◽  
Group Differences ◽  
Future Research ◽  
Bipolar I Disorder ◽  
Decision Making Processes ◽  
Gains And Losses ◽  
Survey Approach

Bipolar disorder (BD) is associated with impaired decision making, yet few studies have adopted paradigms from behavioral economics to decompose which, if any, aspects of decision making may be impacted. This may be particularly relevant for decision-making processes relevant to known difficulties with emotive dysfunction and corresponding reward dysregulation in BD. Participants with bipolar I disorder (BD; n = 44) and non-psychiatric healthy controls (CTL; n = 28) completed three well-validated behavioral economics decision making tasks via a remote-based survey, including loss aversion and framing effects, that examined sensitivity to probabilities and potential gains and losses in monetary and non-monetary domains. Consistent with past work, we found evidence of moderate loss aversion and framing effects across all participants. No group differences were found in any of the measures of loss aversion or framing effects. We report no group differences between bipolar and non-psychiatric groups with respect to loss aversion and framing effects using a remote-based survey approach. These results provide a framework future studies to explore similar tasks in clinical populations and suggest the context and degree to which decision making is altered in BD may be rooted in a more complex cognitive mechanism that warrants future research.

scholarly journals Institutional Investors, Past Performance, and Dynamic Loss Aversion

2009 ◽  
Vol 44 (1) ◽  
pp. 155-188 ◽  
Author(s):  
Paul G. J. O’Connell ◽  
Melvyn Teo
Keyword(s):  
Risk Taking ◽  
Loss Aversion ◽  
Institutional Investors ◽  
Disposition Effect ◽  
Past Performance ◽  
Increase Risk ◽  
Reduce Risk ◽  
Proprietary Database ◽  
Dynamic Loss ◽  
Gains And Losses

AbstractUsing a proprietary database of currency trades, this paper explores the effects of trading gains and losses on risk-taking among large institutional investors. We find that institutional investors, unlike individuals, are not prone to the disposition effect. Instead, institutions aggressively reduce risk following losses and mildly increase risk following gains. This asymmetry is more pronounced later in the calendar year and among older and more experienced funds. We show that such performance dependence is consistent with dynamic loss aversion (Barberis, Huang, and Santos (2001)) and overconfidence. In addition, prior institutional gains and losses have palpable implications for future prices.

scholarly journals Motor Cortex Excitability Reflects the Subjective Value of Reward and Mediates its Effects on Incentive Motivated Performance

2018 ◽  
Author(s):  
Joseph Galaro ◽  
Pablo Celink ◽  
Vikram S. Chib
Keyword(s):  
Loss Aversion ◽  
Magnetic Stimulation ◽  
Cortical Excitability ◽  
Incentive Motivation ◽  
Motor Cortical Excitability ◽  
Subjective Value ◽  
Behavioral Sensitivity ◽  
Motor Cortical ◽  
Gains And Losses ◽  
The Relationship

ABSTRACTPerformance-based incentives tend to increase an individual’s motivation, resulting in enhancements in behavioral output. While much work has focused on understanding how the brain’s reward circuitry influences incentive motivated performance, fewer studies have investigated how such reward representations act on the motor system. Here we measured motor cortical excitability with transcranial magnetic stimulation (TMS) while female and male human participants performed a motoric incentive motivation task for prospective monetary gains and losses. We found that individuals’ performance increased for increasing prospective gains and losses. While motor cortical excitability appeared insensitive to prospective loss, temporal features of motor cortical excitability for prospective gains were modulated by an independent measure of an individual’s subjective preferences for incentive (i.e., loss aversion). Those individuals that were more loss averse had a greater motor cortical sensitivity to prospective gain, closer to movement onset. Critically, behavioral sensitivity to incentive and motor cortical sensitivity to prospective gains were both predicted by loss aversion. Furthermore, causal modeling indicated that motor cortical sensitivity to incentive mediated the relationship between subjective preferences for incentive and behavioral sensitivity to incentive. Together our findings suggest that motor cortical activity integrates information about the subjective value of reward to invigorate incentive motivated performance.SIGNIFICANCE STATEMENTIncreasing incentives tend to increase motivation and effort. Using a motoric incentive motivation task and transcranial magnetic stimulation, we studied the motor cortical mechanisms responsible for incentive motivated motor performance. We provide experimental evidence that motor cortical sensitivity to incentive mediates the relationship between subjective preferences for incentive and incentive motivated performance. These results indicate that, rather than simply being a reflection of motor output, motor cortical physiology integrates information about reward value to motivate performance.

scholarly journals The disposition effect in shares trading

2018 ◽  
Vol 16 (1) ◽  
pp. 33-39
Author(s):  
Manas Mayur
Keyword(s):  
Loss Aversion ◽  
Disposition Effect ◽  
Individual Investors ◽  
Financial Assets ◽  
Factors Affecting ◽  
Incremental Value ◽  
Trading Volumes ◽  
Indian Stock Market ◽  
Regret Aversion ◽  
Gains And Losses

The disposition effect is related to the way investors tend to treat unrealized gains and losses on financial assets. In particular, the research found that investors have the tendency to realize gains more quickly than losses. Shefrin and Statman (1985) found that people dislike losing significantly more than they enjoy winning. The disposition effect has been described as “one of the most robust facts about the trading of individual investors" because investors will hold stocks that have lost value yet sell stocks that have gained value. In 1979, Daniel Kahneman and Amos Tversky traced the cause of the disposition effect to the so-called "prospect theory". Given the significance of disposition effect and its impact on investment decisions, the present study investigates factors affecting the disposition effect in the Indian stock market. The results of the study indicate that loss aversion, regret aversion, trading volumes, automatic selling and incremental value of holding positively contribute to the disposition effect.

scholarly journals No Evidence of Loss Aversion Disappearance and Reversal in Walasek and Stewart (2015)

2021 ◽  
Author(s):  
Quentin André ◽  
Bart de Langhe
Keyword(s):  
Behavioral Economics ◽  
Measurement Invariance ◽  
Loss Aversion ◽  
Experimental Psychology ◽  
Sampling Theory ◽  
Utility Functions ◽  
Experimental Designs ◽  
Experimental Paradigm ◽  
P Loss ◽  
Gains And Losses

Loss aversion—the idea that losses loom larger than equivalent gains—is one of the most important ideas in Behavioral Economics. In an influential article published in the Journal of Experimental Psychology: General, Walasek and Stewart (2015) test an implication of decision by sampling theory: Loss aversion can disappear, and even reverse, depending on the distribution of gains and losses people have encountered. In this manuscript, we show that the pattern of results reported in Walasek and Stewart (2015) should not be taken as evidence that loss aversion can disappear and reverse, or that decision by sampling is the origin of loss aversion. It emerges because the estimates of loss aversion are computed on different lotteries in different conditions. In other words, the experimental paradigm violates measurement invariance, and is thus invalid. We show that analyzing only the subset of lotteries that are common across conditions eliminates the pattern of results. We note that other recently published articles use similar experimental designs, and we discuss general implications for empirical examinations of utility functions.

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