28th Annual Student Research Conference
The Irony of Loss Aversion Part II: The Hidden Cost of Hidden Gains
Sarah A. Hemme*, Roxanne K. Chong, and Mattea Pezza
Dr. Robert Tigner, Faculty Mentor
The Irony of Loss Aversion Part II: The Hidden Cost of Hidden Gains Loss aversion is generally defined as a higher sensitivity to losses than to gains. People dont like to lose money, nor do they like to lose options or freedoms. This study examined how much it takes to overcome loss aversion. Participants played a game in which they repeatedly picked one of three options to earn money governed by a hidden payout schedule. The only way to keep all three options available is to continually switch between them, but switching comes at a cost. Some participants were charged an overt flat fee for each switch, while others covertly gained substantially higher payouts when they refrained from switching. Results show that well-defined penalties can reduce loss aversion somewhat, but even substantial penalties do not affect loss aversion if they are not explicit.
Keywords: Loss Aversion, Aversion to Loss, Decision-making, Behavioral Economics
Topic(s):Psychology
Presentation Type: Oral Paper
Session: 210-2
Location: VH 1328
Time: 12:00