Abstract
When making decisions, people tend to overweigh the impact of losses compared to gains, a phenomenon known as loss aversion (LA). A moderate amount of LA may be adaptive as it is necessary for protecting oneself from danger. However, excessive LA may leave people few opportunities and ultimately lead to suboptimal outcomes. Despite frequent reports of elevated LA in specific populations such as patients with depression, little is known about what psychological characteristics are associated with the tendency of LA. Based on the neurobiological studies of LA, we hypothesized that positive psychological wellbeing may be negatively associated with people's tendency of LA. In the present study, we set out to test this hypothesis in a sample of young adults. We evaluated LA using a decision-making task in which subjects were asked to decide whether to accept or reject a series of coin-toss gambles. Our results revealed that individuals with more advanced personal growth as assessed by the Ryff's Psychological Well-being Inventory showed reduced LA. To our knowledge, this is the first report demonstrating an association between positive psychological wellbeing and LA. These findings suggest that personal growth might be employed as interventional targets for correcting excessive LA in vulnerable populations.
Highlights
When making decisions, people tend to overweigh the impact of losses compared to gains (Kahneman and Tversky, 1979)
We collapsed the 8 by 8 gain/loss combinations into a 4 by 4 matrix and calculated the probability of gamble acceptance at each cell for each subject
As we were interested in what domain(s) of psychological wellbeing might be associated with loss aversion (LA), we examined the correlation between the six domains of psychological wellbeing and λ (Table 1)
Summary
People tend to overweigh the impact of losses compared to gains (Kahneman and Tversky, 1979). When presented with gambles with equal chances of winning and losing, in order to accept a gamble, people demand almost twice the amount of potential gains compared to losses (Tom et al, 2007). This phenomenon, known as loss aversion (LA), has been an extensively studied decision bias (Barberis, 2013, but see Yechiam and Hochman, 2013; Gal and Rucker, 2018; Yechiam, 2019 for critiques of the concept). In certain situations, excessive LA may lead to negative, undesirable consequences. Healthy subjects show increased LA in response to negative stimuli such as unpleasant odors (Stancak et al, 2015) or fearful faces (Schulreich et al, 2016)
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