Loss aversion: A fantastic principle or a trick of the eye?
It is often claimed that negative events carry a larger weight than positive events. Loss aversion is the manifestation of this argument in monetary outcomes. In the first part of this talk I will examine early studies of the utility function of gains and losses, and in particular the original evidence for loss aversion reported by Kahneman and Tversky (1979). It will be suggested that loss aversion proponents have over-interpreted these findings. Moreover. it will be argued that the findings of some of these studies have been misrepresented to reflect loss aversion though they did not find it. In second part of the talk (should time allow), I will talk about the effect of gains and losses on memory (an ongoing study). Will argue that as in decision making, people do not tend to recall negative events more than positive events when positive and negative events are presented concurrently. There is however a tendency to recall negative events more accurately when positive and negative events are experienced in isolation.