Comparative Loss Aversion: Some New Behavioral Implications

Abstract

This paper proposes a new loss aversion coefficient for decision makers. Considering this loss aversion coefficient and Shalev’s (2002) perceptive utility function, we define a new version of rank-dependent expected utility theory. Our main results extend the restrictions of comparative loss aversion, and reveal the behavioral implications of comparative loss aversion. The new loss aversion coefficient is well defined as a measure of degree of loss aversion. Our main findings of comparative loss aversion can also be applied to welfare, health, insurance and other topical economic problems. Key words: Loss aversion coefficient; Comparative loss aversion; Rank-dependent expected utility; Decision making under risk