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Asymmetric perception of gains vs non-losses and losses vs non-gains: The causal role of regulatory focus

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  • Simona Sacchi

    ()

  • Luca Stanca

    ()

Abstract

Recent studies show that, while losses loom larger than equivalent non-gains, gains loom larger than equivalent non-losses. This finding, at odds with the loss aversion principle, has been interpreted within the framework of regulatory focus theory. In this study, we explore the causal effect of regulatory focus on the asymmetric perception of gains vs non-losses and losses vs non-gains. We examine the perceived effects of both hypothetical and actual changes in monetary wealth, while orthogonally manipulating framing, valence, and regulatory focus. We find a significant interaction between the three factors. The gain vs non-loss asymmetry in perceived satisfaction is stronger in promotion focus, while the loss vs non-gain asymmetry in perceived dissatisfaction is stronger in prevention focus. The results suggest that the effects of incentives framed in terms of (non)gains and (non)losses, depend on their congruence with the individual’s motivational state.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper214.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 214.

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Length: 18 pages
Date of creation: Nov 2011
Date of revision: Nov 2011
Handle: RePEc:mib:wpaper:214

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Keywords: Loss-gain asymmetry; regulatory focus; prospect theory; subjective value;

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  1. Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, vol. 36(6), pages 643-660, June.
  2. Halamish, Vered & Liberman, Nira & Higgins, E. Tory & Idson, Lorraine Chen, 2008. "Regulatory focus effects on discounting over uncertainty for losses vs. gains," Journal of Economic Psychology, Elsevier, vol. 29(5), pages 654-666, November.
  3. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  4. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  5. Daniel Kahneman & Jack L. Knetsch & Richard H. Thaler, 1991. "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter.
  6. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
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