Moderating Loss Aversion: Loss Aversion Has Moderators, But Reports of its Death are Greatly Exaggerated

Forthcoming, Journal of Consumer Psychology.

54 Pages Posted: 6 Jan 2020

See all articles by Kellen Mrkva

Kellen Mrkva

Columbia Business School - Marketing

Eric J. Johnson

Columbia Business School - Marketing

Simon Gaechter

University of Nottingham; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute)

Andreas Herrmann

University of St. Gallen - MCM Institute

Date Written: December 13, 2019

Abstract

Loss aversion, the principle that losses impact decision making more than equivalent gains, is a fundamental idea in consumer behavior and decision making, though its existence has recently been called into question. Across five unique samples (Ntotal = 17,720), we tested predictions about what moderates loss aversion, which were derived from a preference construction account. Across studies, more domain knowledge, experience, and education were associated with lower loss aversion, though people of all knowledge, experience, and education levels were loss averse. Among car buyers, those who knew more about a particular car attribute (e.g., fuel economy) were less loss averse for that attribute but not other attributes (e.g., comfort), consistent with the idea that people with less attribute knowledge are more likely to construct preferences, thereby increasing loss aversion. Additionally, older consumers were more loss averse across different loss aversion measures and studies. We discuss implications for several accounts of loss aversion, including alternative accounts rooted in status quo bias, emotion, or feelings of ownership. In addition to discovering key loss aversion moderators, we cast doubt on recent claims that loss aversion is a fallacy or is fully explained by status quo bias, risk aversion, or the educated laboratory samples often used to study loss aversion.

Keywords: loss aversion, judgment and decision making, preference construction, status quo, age, experience

Suggested Citation

Mrkva, Kellen and Johnson, Eric J. and Gachter, Simon and Herrmann, Andreas, Moderating Loss Aversion: Loss Aversion Has Moderators, But Reports of its Death are Greatly Exaggerated (December 13, 2019). Forthcoming, Journal of Consumer Psychology.. Available at SSRN: https://ssrn.com/abstract=3503581

Kellen Mrkva (Contact Author)

Columbia Business School - Marketing ( email )

New York, NY 10027
United States

HOME PAGE: http://kellenmrkva.wordpress.com

Eric J. Johnson

Columbia Business School - Marketing ( email )

New York, NY 10027
United States

Simon Gachter

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Andreas Herrmann

University of St. Gallen - MCM Institute ( email )

Blumenbergplatz 9
CH-9000 St. Gallen
Switzerland
+41-71-224-3026 (Phone)

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