Why does loss aversion occur?

Loss aversion occurs because most people prefer to avoid loss instead of realize gains. A phenomenon called "prospect theory" can help explain why loss aversion occurs. This theory suggests that given two equal choices, one that offers potential gains and one that results in potential losses, most people choose the first option.

Is loss aversion a fallacy?

A recent study claims a core idea in behavioural economics – loss aversion – is a fallacy. Loss aversion is the theory that the pain of losing something is greater than the pleasure we feel by gaining something equivalent. Loss aversion forms the basis of a lot of behavioural economics, including analysis on The Conversation.

Does arousal affect loss aversion?

Psychophysiological research has shown that arousal responses to loss and gain outcomes are correlated with the estimated degree of individual loss aversion, and emotion-regulation strategies reduced loss aversion and physiological responses to loss outcomes ( Sokol-Hessner et al., 2009 ).

Does loss aversion change with age?

Loss aversion is no different in individuals meeting criteria for generalized anxiety disorder. Women are as equally loss averse as men, except during ovulation, when they are less loss averse. When participants played for points on a smartphone application, loss aversion did not change with age.