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

Author

Listed:
  • 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.

Suggested Citation

  • Simona Sacchi & Luca Stanca, 2011. "Asymmetric perception of gains vs non-losses and losses vs non-gains: The causal role of regulatory focus," Working Papers 214, University of Milano-Bicocca, Department of Economics, revised Nov 2011.
  • Handle: RePEc:mib:wpaper:214
    as

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    File URL: http://dems.unimib.it/repec/pdf/mibwpaper214.pdf
    File Function: First version, 2011
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    References listed on IDEAS

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    1. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    2. 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.
    3. 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.
    4. 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 728-741, September.
    5. 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.
    6. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
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    More about this item

    Keywords

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

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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