Open AccessWhy and Under What Conditions Does Loss Aversion Emerge? 1
Author(s) -
Nagaya Kazuhisa
Publication year - 2023
Publication title -
japanese psychological research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.392
H-Index - 30
eISSN - 1468-5884
pISSN - 0021-5368
DOI - 10.1111/jpr.12385
Subject(s) - loss aversion , prospect theory , intrapersonal communication , preference , psychology , perspective (graphical) , risk aversion (psychology) , economics , social psychology , cognitive psychology , microeconomics , expected utility hypothesis , interpersonal communication , mathematics , mathematical economics , geometry
A person's propensity to attribute more weight to a loss than a gain of equal magnitude is known as “loss aversion.” Loss aversion is a component of the prospect theory (which provides a descriptive account of a person's value judgments) and has broad effects in terms of market transactions, intrapersonal decision‐making, and behavioral regulations. Previous studies have considered loss aversion as an omnipresent fundamental psychological bias; however, recent studies have highlighted the limitations of its impact. Accordingly, this paper summarizes the process and boundary conditions of loss aversion in decision‐making under risk, considering four distinct approaches: the absolute magnitude of losses, the bias of attentional allocation, the ranking of losses relative to gains, and the preference for inaction. A comprehensive overview of studies that examined loss aversion from these different perspectives reveals detailed boundary conditions for loss aversion and provides an in‐depth perspective on the mechanism of its occurrence. Based on these findings, specific directions for future loss‐aversion studies are discussed.