Loss Aversion Under Cognitive Load
Journal of Personal Finance. Forthcoming.
26 Pages Posted: 22 Nov 2013 Last revised: 23 Jul 2014
Date Written: July 16, 2014
An experiment was conducted to explore whether loss aversion is altered when individuals are placed under a higher level of cognitive load. The coefficients of monetary loss aversion were measured for 30 participants under low and high cognitive load. Memorizations of differing spans of digits were used to manipulate cognitive load. Participants’ skin conductance was measured to quantify emotional responses to gains and losses. No statistically significant evidence was found that loss aversion, as measured by choice, is altered when individuals are placed under a higher level of cognitive load. Statistically significant evidence was found that a higher level of cognitive load temporarily reduces an individual’s emotional arousal to absolute and relative small dollar losses.
Keywords: loss aversion, cognitive load, skin conductance response
JEL Classification: D10, D81
Suggested Citation: Suggested Citation