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Loss Aversion

Author

Listed:
  • Taisuke Imai

    (Osaka University, CESifo)

  • Klaus Schmidt

    (LMU Munich, CESifo)

Abstract

Loss aversion postulates that people prefer avoiding losses over acquiring gains of equal size. It is a central part of prospect theory and, according to Daniel Kahneman, “the most significant contribution of psychology to behavioral economics” (Kahneman, 2011, p. 300). It has powerful implications for decision theory and has been fruitfully applied in many subfields of economics. However, because the reference point is often not well defined and loss aversion interacts with other behavioral biases, there is some controversy about the concept.

Suggested Citation

  • Taisuke Imai & Klaus Schmidt, 2023. "Loss Aversion," Rationality and Competition Discussion Paper Series 461, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:461
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    References listed on IDEAS

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    Keywords

    loss aversion; reference point; prospect theory; endowment effect; decision theory; risk;
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