People exert more effort to avoid losses than to obtain gains.

Abstract

Loss aversion is a fundamental tenet of behavioral economics and has led to many real-world applications. These applications, and some laboratory studies, show that people perform better under loss-avoidance than under gain incentives. This increased performance under loss-avoidance incentives has ubiquitously been explained by the notion that loss aversion causes people to exert more effort to avoid losses than to obtain gains. Only limited work, however, has directly examined whether people indeed choose to exert more effort to avoid losses than to obtain gains. Our primary aim was therefore to test this proposition. In an experiment with adults (N = 32) and in a subsequent experiment with children and adolescents (N = 29), we found that participants indeed exerted more effort to avoid losses than to obtain numerically equivalent gains. The effect sizes were large, with the effect being evident for most individual participants. As a secondary aim, in the study with adults, we also investigated whether the greater effort to avoid losses related to loss aversion measured using a task involving choices between prospects. Unexpectedly, the greater effort to avoid losses persisted robustly even after controlling for the effects of loss aversion measured using the task involving choices between prospects. We discuss two possible interpretations for this finding: our effort task may have been a more sensitive assessment of loss aversion than the task involving choices between prospects; alternatively, the processes underlying how much effort people choose to exert may partially differ from those engaged by choices between prospects. (PsycInfo Database Record (c) 2021 APA, all rights reserved).