A Subtle Pronoun Shift Reduces Loss Aversion

Abstract

In this paper, we propose and examine the de-biasing effect of self-distancing on loss aversion. In a laboratory setting, subjects made a set of binary decisions on whether to participate in a mixed gamble. Stemmed from the psychological literature on self-distancing, we manipulated the degree of self-distancing through the use of personal pronouns. We administered four treatment conditions —“I,” “You,” “No Pronoun,” and “Participant”—and subtly embedded this linguistic manipulation in the description of the payoff outcomes. Our results show that people exhibited a lower degree of loss aversion when the payoff information was conveyed using a pronoun that induced a higher level of self-distancing. Females were so much more responsive than were males to these subtle linguistic cues that the gender difference in loss aversion was closed in the two self-distanced conditions. The results have important theoretical and policy implications.

Keywords: self-distancing; loss aversion; personal pronouns; gender difference

JEL Classification: D81, C91