Loss Aversion in Riskless Choice: A Reference-Dependent Model

1991/11/01 by Amos Tversky, A. Tversky, Daniel Kahneman +1 · 50 citations
Decision Sciences · Economics, Econometrics and Finance · Business, Management and Accounting · #Decision-Making and Behavioral Economics #Economic and Environmental Valuation #Consumer Market Behavior and Pricing

paper · doi:10.2307/2937956

Abstract

Much experimental evidence indicates that choice depends on the status quo or reference level: changes of reference point often lead to reversals of preference. We present a reference-dependent theory of consumer choice, which explains such effects by a deformation of indifference curves about the reference point. The central assumption of the theory is that losses and disadvantages have greater impact on preferences than gains and advantages. Implications of loss aversion for economic behavior are considered.

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