When Do Losses Loom Larger than Gains?
Abstract
In defining limits to loss aversion, Novemsky and Kahneman (2005) offer important new data and a needed summary of appropriate ways to think about loss aversion. In this comment to Novemsky and Kahneman's article, the authors consider the new empirical results that involve probabilistic buying and selling, suggesting caution in generalizing the results to nonprobabilistic commerce. The authors expand Novemsky and Kahneman's summary by exploring two critical constructs that help define the boundaries of loss aversion: emotional attachment and cognitive perspective. Emotional attachment alters loss aversion by moderating the degree to which parting with an item involves a loss, whereas shifts in cognitive perspective explain why items typically viewed as a loss are given more or less weight. The goal is to use these constructs to characterize more specifically contexts in which losses loom larger than gains and to suggest specific ways that research into loss aversion could evolve.
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Loss aversion appears to increase with affective enrichment of hedonic consumer goods and more generally with emotional attachment.
“loss aversion appears to increase with affective enrichment of “hedonic” consumer goods (e.g., music CDs versus computer disks) (11) and more generally with emotional attachment (12).”
From Amygdala damage eliminates monetary loss aversion (2010) · cites this paper as [12]
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Pratama, A. R., & Firmansyah, F. M. (2021) · Applied Computing and Informatics · doi:10.1108/aci-12-2020-0156 · Cited by 31 · see citing works
Bækgaard, M. (2017) · Public Administration · doi:10.1111/padm.12324 · Cited by 31 · see citing works
“From an affective perspective, emotional attachment is likely to increase the feeling of a loss when an item or a good is given away and hence to increase asymmetry of risk preferences (Ariely, Huber, and Wertenbroch 2005: 136; Aggarwal and Zhang 2006).”
BackgroundSchickinger, A., Bertschi-Michel, A., Leitterstorf, M. P., & Kammerlander, N. H. (2021) · Small Business Economics · doi:10.1007/s11187-021-00448-x · Cited by 31 · see citing works
He, F., Guan, H., Kong, Y., Cao, R. Z., & Peng, J. (2013) · Social Indicators Research · doi:10.1007/s11205-013-0519-0 · Cited by 30 · see citing works
Loss aversion and the uniform pricing puzzle for media and entertainment products
Courty, P., & Nasiry, J. (2017) · Economic Theory · doi:10.1007/s00199-017-1055-y · Cited by 30 · see citing works
Investigations of sales representatives’ valuation of options
Bonney, L., Plouffe, C. R., & Brady, M. K. (2014) · Journal of the Academy of Marketing Science · doi:10.1007/s11747-014-0412-7 · Cited by 30 · see citing works
Hawkish Biases and the Interdisciplinary Study of Conflict Decision-Making
Renshon, J., & Kahneman, D. J. (2016) · Springer eBooks · doi:10.1007/978-3-319-40823-1_3 · Cited by 29 · see citing works
Restaurants’ motivations to solicit fake reviews: A competition perspective
Zhang, Z., Li, Y., Li, H., & Zhang, Z. (2022) · International Journal of Hospitality Management · doi:10.1016/j.ijhm.2022.103337 · Cited by 29 · see citing works
Time to say goodbye: The impact of anthropomorphism on selling prices of used products
Kim, J., & Swaminathan, S. (2021) · Journal of Business Research · doi:10.1016/j.jbusres.2020.12.046 · Cited by 28 · see citing works
Evaluating Behavior Priming Research: Three Observations and a Recommendation
Dijksterhuis, A., van Knippenberg, A., & Holland, R. W. (2014) · Social Cognition · doi:10.1521/soco.2014.32.supp.196 · Cited by 27 · see citing works
McDonald, R., Boaden, R., Roland, M. O., Kristensen, S. R., Meacock, R., Lau, Y., Mason, T., Turner, A. J., & Sutton, M. (2015) · Health Services and Delivery Research · doi:10.3310/hsdr03230 · Cited by 27 · see citing works
“Pay for performance and penalties Economic theory(49) suggests that ‘people impute greater value to a given item when they give it up than when they acquire it’.(50) Although this implies that penalties may more effectively encourage behaviour changes among providers than would equivalent rewards, more recent evidence…”
BackgroundKlein, S. B., & Kellermanns, F. W. (2008) · Family Business Review · doi:10.1111/j.1741-6248.2008.00116.x · Cited by 27 · see citing works
My Loss Is Your Loss … Sometimes: Loss Aversion and the Effect of Motivational Biases
Wilson, R. S., Árvai, J., & Arkes, H. R. (2008) · Risk Analysis · doi:10.1111/j.1539-6924.2008.01065.x · Cited by 26 · see citing works
“Others have raised similar concerns; Ariely et al.(14) have called for studies of prospect theory in contexts that involve the loss and gain of products, services, and rights for which people have stronger emotional attachments.”
BackgroundDoes the reward match the effort for loyalty program members?
Danaher, P. J., Sajtos, L., & Danaher, T. S. (2016) · Journal of Retailing and Consumer Services · doi:10.1016/j.jretconser.2016.05.015 · Cited by 25 · see citing works
The neural correlates of endowment effect without economic transaction
Votinov, M., Mima, T., Aso, T., Abe, M., Sawamoto, N., Shinozaki, J., & Fukuyama, H. (2010) · Neuroscience Research · doi:10.1016/j.neures.2010.05.006 · Cited by 24 · see citing works
“An individual has the tendency to weigh losses more heavily than gains of similar size, so that changes in the reference point can alter choices (Ariely et al. 2005; Kahneman and Tversky 1979).”
Endowment effect for hedonic but not utilitarian goods
Chan, E. Y. (2015) · International Journal of Research in Marketing · doi:10.1016/j.ijresmar.2015.06.003 · Cited by 24 · see citing works
Framing effects in medical situations: Distinctions of attribute, goal and risky choice frames
Peng, J., Jiang, Y., Miao, D., Li, R., & Xiao, W. (2013) · Journal of International Medical Research · doi:10.1177/0300060513476593 · Cited by 23 · see citing works
The role of personal data value, culture and self-construal in online privacy behaviour
Fleming, P., Bayliss, A. P., Edwards, S. G., & Seger, C. R. (2021) · PLoS ONE · doi:10.1371/journal.pone.0253568 · Cited by 22 · see citing works
“An individual is more likely to take action to protect their belongings (including data) if they are concerned about likely loss or damage or simply because they perceive their belongings as valuable [55].”
BackgroundAge-related striatal BOLD changes without changes in behavioral loss aversion
Viswanathan, V., Lee, S., Gilman, J. M., Kim, B. W., Lee, N. J., Chamberlain, L., Livengood, S. L., Raman, K., Lee, M. J., Kuster, J., et al. (2015) · Frontiers in Human Neuroscience · doi:10.3389/fnhum.2015.00176 · Cited by 22 · see citing works
“LA has become an important variable in consumer research (Ariely et al., 2005; Paraschiv and L’Haridon, 2008) and is consistent with the observation that older individuals are more focused on goals pertaining to maintenance and regulation of loss (Ebner et al., 2006).”
Lu, M., & Jen, W. (2016) · Psychology and Marketing · doi:10.1002/mar.20921 · Cited by 22 · see citing works
The Budget Contraction Effect: How Contracting Budgets Lead to Less Varied Choice
Carlson, K. A., Wolfe, J., Blanchard, S. J., Huber, J. C., & Dan Ariely, C. (2014) · Journal of Marketing Research · doi:10.1509/jmr.10.0243 · Cited by 20 · see citing works
“In general, loss aversion is believed to occur because of the expectation that the pain of losing something will be greater than the pleasure of an equivalent gain (e.g., Ariely, Huber, and Wertenbroch 2005; Kahneman and Tversky 1984).”
BackgroundSelf-citationThere and up again: On the uses and misuses of neuroimaging in psychology
Pinal, G. D., & Nathan, M. J. (2013) · Cognitive Neuropsychology · doi:10.1080/02643294.2013.846254 · Cited by 20 · see citing works
Graul, A. R. H., & Brough, A. R. (2020) · Journal of Consumer Psychology · doi:10.1002/jcpy.1193 · Cited by 19 · see citing works
Reduced framing effect: Experience adjusts affective forecasting with losses
Fu, L., Yu, J., Ni, S., & Li, H. (2018) · Journal of Experimental Social Psychology · doi:10.1016/j.jesp.2018.02.006 · Cited by 19 · see citing works
Reactive Devaluation as a Psychological Impediment to Construction Dispute Negotiation
Cheung, S. O., Li, K., & Chow, O. Y. (2020) · Journal of Management in Engineering · doi:10.1061/(asce)me.1943-5479.0000787 · Cited by 18 · see citing works
Banerjee, S., & Conte, M. (2018) · American Journal of Agricultural Economics · doi:10.1093/ajae/aay064 · Cited by 18 · see citing works
“Producers may also exhibit lossaversion and experience an endowment effect (Ariely et al. 2005) with respect to their land which in turn may impact their offers.”
BackgroundThe Psychological Science of Spending Money
Carter, T. J. (2014) · Springer eBooks · doi:10.1007/978-1-4939-0959-9_10 · Cited by 18 · see citing works
Keeping your gains close but your money closer: The prepayment effect in riskless choices
Hochman, G., Ayal, S., & Ariely, D. (2014) · Journal of Economic Behavior & Organization · doi:10.1016/j.jebo.2014.01.014 · Cited by 17 · see citing works
Self-citationMoney is no object: Testing the endowment effect in exchange goods
Svirsky, D. (2014) · Journal of Economic Behavior & Organization · doi:10.1016/j.jebo.2014.07.003 · Cited by 17 · see citing works
- Authors
- Ariely, D., Huber, J., & Wertenbroch, K.
- Affiliations
- Massachusetts Institute of Technology (US)
- Duke University (US)
- INSEAD (FR)
- Corresponding author
- Ariely, Dan
- Huber, Joel
- Wertenbroch, Klaus
- Venue
- Journal of Marketing Research
- Publisher
- SAGE Publications
- Published
- 2005-05
- Volume
- 42
- Issue
- 2
- Pages
- 134-138
- ISSN
- 0022-2437 (ISSN-L)
- 1547-7193
- OpenAlex
- W2061239943
- Cited by
- 267
- References
- 25
- Citations by year
- 2026: 4 · 2025: 12 · 2024: 9 · 2023: 14 · 2022: 11 · 2021: 22 · 2020: 11 · 2019: 13 · 2018: 23 · 2017: 16 · 2016: 17 · 2015: 19 · 2014: 20 · 2013: 12 · 2012: 14
- FWCI
- 4.47
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Journal of Marketing Research (publishedVersion)
- Topics
- Social Sciences › Decision Sciences › General Decision Sciences › Decision-Making and Behavioral Economics
- Social Sciences › Safety Research › Experimental Behavioral Economics Studies
- Social Sciences › Business, Management and Accounting › Marketing › Consumer Market Behavior and Pricing
- Keywords
- loss aversion, emotional attachment, cognitive approach, purchase decision, consumer behavior
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