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by jonny_eh 2877 days ago
That's a great summation. It seems as though there's confusion as to what constitutes loss aversion. IIRC, the original paper by Kahneman, Knetsch, and Thaler [0] talked about losing something you had. Meanwhile, the posted argument talks about whether someone is more or less likely to buy something if the price goes up or down. These are such different situations! The first is losing something you have, the second is deciding whether you want to trade some money for a thing.

[0] https://www.aeaweb.org/articles?id=10.1257/jep.5.1.193
3 comments
thatthatis 2877 days ago
“The price will rise, but now” is the most tenuous loss aversion I’ve ever heard of.

“You have a $10 credit, it expires in 2 days” would test loss aversion.

That consumers behave rationally in the face of price rises is an interesting finding. But it’s a far cry from testing loss aversion.

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snowwrestler 2876 days ago
"Loss aversion" as a cognitive bias is not just the desire to avert any loss.

If it really is a general cognitive bias, it will show up as a difference from expected statistics.

Imagine a held asset that has an even chance of going up or down. You'd expect to see about half of people sell it and half hold it. A cognitive bias would alter that ratio. If 75% of people sold it, and only 25% held it (despite even odds), you could say that there appears to be a bias at work.

A great example of cognitive bias at work in the real world is the Monty Hall 3 door riddle. Most people get this wrong even though the math is not hard.

But simply avoiding a predicted loss is not "loss aversion" as a cognitive bias. It's not even a bias at all; it's rational to avoid loss.

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prabhasp 2877 days ago
That is the endowment effect https://en.m.wikipedia.org/wiki/Endowment_effect
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mercutio2 2876 days ago
I was under the impression the endowment effect and loss aversion were synonyms.

Is there a meaningful difference when these are used as psychological terms of art (as opposed to pop psych just-so explanations)?

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pas 2877 days ago
How well does that [the original] replicate? Is there non-self-reported data for it?
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