2016 Student Research Conference:
29th Annual Student Research Conference

Learning to Let Go: How Our Struggle with Loss Aversion Makes Us Losers
Mattea C. Pezza* and Roxanne K. Chong
Dr. Robert Tigner, Faculty Mentor

Loss aversion is generally defined as a higher sensitivity to losses than to gains. People don't 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 overtly gained substantially higher payouts when they refrained from switching. Results indicate that an explicit fee for switching and an explicit bonus for staying were effective in reducing loss aversion. However, the aversion to losing freedom of choice was powerful enough that participants continued to make irrational decisions just to keep their options open.

Keywords: loss aversion, aversion to loss, decision making, behavioral economics


Presentation Type: Oral Paper

Session: -3
Location: MG 2050
Time: 8:30

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