Loss Aversion
Description
Tendency to prefer avoiding losses to acquiring equivalent gains.
Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263–291.
Task
Loss aversion is measured at the individual level in riskless and risky choices. The riskless task is an endowment effect experiment in which WTA and WTP are elicited. In the risky choice task (lottery choice task), participants are presented with six low-stake lotteries with a 50-50 chance of a fixed gain (€6) and losses that varied from €2 to €7 and they indicate for each one whether they would play the lottery or not.
Items (1) Lottery choice task
Scoring
In the riskless task, loss aversion is the difference between WTA and WTP. In the risky task, participants who monotonically rejected the lotteries with non-negative payoffs (those with losses from €2 to €5) are coded as loss averse.
Source
Gächter, S., Johnson, E. J., & Herrmann, A. (2022). Individual-level loss aversion in riskless and risky choices. Theory and Decision, 92, 599-624.