Comparing Gains and Losses

Abstract

Loss aversion in choice is commonly assumed to arise from the anticipation that losses have a greater effect on feelings than gains, but evidence for this assumption in research on judged feelings is mixed. We argue that loss aversion is present in judged feelings when people compare gains and losses and assess them on a common scale. But many situations in which people judge and express their feelings lack these features. When judging their feelings about an outcome, people naturally consider a context of similar outcomes for comparison (e.g., losses against other losses). This process permits gains and losses to be normed separately and produces psychological scale units for gains and losses that may not be the same in size or meaning. Our experiments show loss aversion in judged feelings for tasks that encourage gain-loss comparisons but not in tasks that discourage them, particularly those using bipolar scales.