The Boundaries of Loss Aversion

Author(s): Nathan Novemsky \| Daniel Kahneman
doi: 10.1509/jmkr.42.2.119.62292
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Journal of Marketing Research

Print ISSN: 0022-2437 | Electronic ISSN: 1547-7193

Volume: 42 | Issue: 2

Cover date: May 2005

Page(s): 119-128



Keywords

loss aversion , prospect theory, endowment effect, risk aversion



Abstract

In this article, the authors propose some psychological principles to describe the boundaries of loss aversion. A key idea is that exchange goods that are given up “as intended” do not exhibit loss aversion. For example, the authors propose that money given up in purchases is not generally subject to loss aversion. The results of several experiments provide preliminary support for the hypotheses. The authors find that, consistent with prospect theory, loss aversion provides a complete account of risk aversion for risks with equal probability to win or lose. The authors propose boundaries for this result and suggest further tests of the model.



Author(s) affiliations

1. Assistant Professor of Marketing, School of Management, Yale University.

(e-mail: nathan.novemsky@yale.edu)

2. Eugene Higgins Professor of Psychology, Psychology Department, Woodrow Wilson School, Princeton University.

(e-mail: Kahneman@princeton.edu)



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