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“The price will rise, but now” is the most tenuous loss aversion I’ve ever heard of. “You have a $10 credit, it expires in 2 days” would test loss aversion. T
by thatthatis 8y ago
“The price will rise, but now” is the most tenuous loss aversion I’ve ever heard of.
“You have a $10 credit, it expires in 2 days” would test loss aversion.
That consumers behave rationally in the face of price rises is an interesting finding. But it’s a far cry from testing loss aversion.
- snowwrestler 8y ago"Loss aversion" as a cognitive bias is not just the desire to avert any loss. If it really is a general cognitive bias, it will show up as a difference from expected statistics. Imagine a held asset that has an even chance of going up or down. You'd expect to see about half of people sell it and half hold it. A cognitive bias would alter that ratio. If 75% of people sold it, and only 25% held it (despite even odds), you could say that there appears to be a bias at work. A great example of cognitive bias at work in the real world is the Monty Hall 3 door riddle. Most people get this wrong even though the math is not hard. But simply avoiding a predicted loss is not "loss aversion" as a cognitive bias. It's not even a bias at all; it's rational to avoid loss.