Talk:Loss aversion
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[edit] Can loss aversion ever be rational?
I dispute the arguments in this entire section. Loss aversion research compares differences in consumer behavior faced with "the same change in price framed differently."
"5% less on $1000" and "not 5% more on $1000" are not the same change in price. The same change in price would be: "$50 less on $1000" vs "not $50 more on $950." The percentage is indeed different -- but that is not a rational reason to prefer one to the other. The idea is that given that there is no difference in the choice, prefering one over the other is irrational, and why do humans make such irrational decisions? In the 950/1000 vs 1000/1050 example, there is a difference.
--Quarl 05:00, August 21, 2005 (UTC)
This section is rather naive. The idea that people are more averse to losing a
given amount than gaining the same amount is absolutely standard in economics, where
it is known as "risk aversion". Utility linear in money is a special case, used
only for simplicity. "Loss aversion" as irrational behavior is something different.
--- Loss aversion can't be explained strictly by the utility function of the expected utility theory. Experiments on monkeys have made a strong case for loss aversion as being a real cognitive bias. See Chen, Keith (2006), "How Basic are Behavioral Biases? Evidence from Capuchin Monkey Trading Behavior". (forthcoming: Journal of Political Economy). Moreover, no reference is made to the endowment effet, a direct consequence of loss aversion, although there exists a strong evidence of it.
Here, it's the author who shows a bias... Just take a look at the references. Maxcanada May 31, 2006
[edit] Irony
The author has a bias, in his description of a bias we have regarding of loss averions? Mathiastck 00:35, 15 August 2006 (UTC)
- In English, please? 84.44.171.253 12:12, 7 November 2006 (UTC)
[edit] psychology
The $1,000 dollar sucharge vs discount example is technically not the same. For the sake of economic analysis "$50 less on $1,000" and "not $50 more on $950" would have to be used. Still, it is doubtful that individuals will undergo such deep thinking when comparing the options. Psychology plays a major role in this issue and the field Behavioral Finance is investigating such effects. I do agree that the topic "Loss aversion" is somewhat misleading. CWRasz 18:09, 2 September 2006 (UTC)
[edit] different example
Wouldn't it be easier for understanding to use a different example, because a 5% discount off 1000$ ($50) is not the same as a 5 % surcharge of 950$ (which is 47.50$).
Suggested Example: Would you rather have a movie ticket priced at regular 10 $, if you go Monday-Wednesday you get 2.50$ off, or a movie ticket priced at 7.50$ Where you'd have to pay a surcharge of 2.50 $ on Thursdays-Sundays. If you go on a Friday night, you'd pay in both cases the same amount of money (10$) but which would you prefer?
Because of loss aversions a majority of customers would prefer the 10$ regular price (and get 2.50$ off Monday to Wednesday) than "losing" the 2.50$ surcharge on 7.50 $ on Weekends. —The preceding unsigned comment was added by Soylentyellow (talk • contribs) .
[edit] An Alternative Example
this section is just copied and pasted from Framing_(economics) Elie 00:46, 25 January 2007 (UTC)
- This example is flawed anyway. Program D claims that a 33% chance that all 600 people will live means there is a 66% chance that everyone will die. Really it's a 66% chance that between 1 and 600 people will die, i.e. a 33% chance that everyone lives, a 66% chance that not everyone lives. LeeWilson 07:14, 5 February 2007 (UTC)
