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On the Psychology of Loss Aversion: Possession, Valence, and Reversals of the Endowment Effect

Author

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  • Lyle Brenner
  • Yuval Rottenstreich
  • Sanjay Sood
  • Baler Bilgin

Abstract

Loss aversion states that "losses loom larger than gains." We consider two types of loss aversion defined by two interpretations of loss. A loss can be defined (1) in terms of valence or (2) in terms of possession. Correspondingly, valence loss aversion (VLA) entails greater sensitivity to negative (vs. positive) changes, and possession loss aversion (PLA) entails greater sensitivity to items leaving (vs. entering) one's possession. Both types of loss aversion imply an endowment effect for attractive items, but PLA implies a reversal of the endowment effect for unattractive items. Experimental results show endowment effect reversals consistent with PLA. (c) 2007 by JOURNAL OF CONSUMER RESEARCH, Inc..

Suggested Citation

  • Lyle Brenner & Yuval Rottenstreich & Sanjay Sood & Baler Bilgin, 2007. "On the Psychology of Loss Aversion: Possession, Valence, and Reversals of the Endowment Effect," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 34(3), pages 369-376, May.
    • Handle: RePEc:oup:jconrs:v:34:y:2007:i:3:p:369-376
    DOI: 10.1086/518545
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