Chapter 1 provides an overview of loss aversion. After a historical account, it describes the experimental and empirical findings that demonstrate loss aversion and elucidate its relationships to more specific phenomena, such as the status quo bias and omission bias, endowment effect, escalation of commitment, and bounded ethicality. The chapter also reviews studies of the relationship between loss aversion and emotions; the neural basis of loss aversion; and hypotheses about its evolutionary roots. It examines what happens when competing and multiple reference points exist, and highlights the generality of reference-dependence in people’s perceptions and judgments. It also examines the effect of professional experience and group decision-making on loss aversion, and reviews attempts to “debias” loss aversion. It mentions other theories that share the notion that losses loom larger than gains, and discusses critiques of prospect theory. Finally, it points to the impact that loss aversion has had on several disciplines.
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