A psychological law of inertia and the illusion of loss aversion

A psychological law of inertia and the illusion of loss aversion

Blog Article

The principle of loss aversion is thought to explain a wide range of anomalous phenomena involving tradeoffs between losses and gains.In this article, I show that the anomalies loss aversion dreamtops was introduced to explain - the risky bet premium, the endowment effect, and the status-quo bias - are characterized not only by a loss/gain tradeoff, but by a tradeoff between the status-quo and change; and, that a propensity towards the status-quo in the latter tradeoff is sufficient to explain these phenomena.Moreover, I show that two basic psychological principles - (1) that motives drive behavior; and (2) that preferences tend to be fuzzy and ill-defined quickderm for dogs - imply the existence of a robust and fundamental propensity of this sort.Thus, a loss aversion principle is rendered superfluous to an account of the phenomena it was introduced to explain.