The problematic past of loss aversion – and future?

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Abstract

It is often claimed that negative events carry a larger weight than positive events. Loss aversion is the manifestation of this argument in monetary outcomes. The current talk begins with a review examining early studies of the utility function of gains and losses, and in particular the original evidence for loss aversion reported by Kahneman and Tversky (1979). It is suggested that loss aversion proponents have over-interpreted these findings. Specifically, early studies of utility functions have shown that while very large losses are overweighted, smaller losses are often not. Also, the findings of some of these studies have been misrepresented to reflect loss aversion though they did not find it. I next present recent counter-claims on the view that loss aversion does not exist in small to moderate accounts (e.g., Mrkva et al., 2020), and six new studies (Zeif & Yechiam, 2021) that address these counter-claims.  Taken together, the findings shed light on the apparent non-reproducibility of loss aversion existing simultaneously with the second literature arguing strongly for it.

The Speaker

Professor Eldad Yechiam is the Harry Lebensfeld Academic Chair at the Technion Faculty of Industrial Engineering and Management. He is (co)Editor in Chief of the Journal of Economic Psychology and President Elect of the European Society for Decision Making. He obtained his PhD at the Technion in 2003 and completed a post-doctoral fellowship at Indiana University. His research areas include attentional and cognitive effect of incentives, individual differences in decision making, and cognitive enhancement.