Individuals' decisions under risk tend to be in line with the notion that "losses loom larger than gains." This loss aversion in decision making is commonly understood as a stable individual preference that is manifested across different contexts. The presumed stability and generality, which underlies the prominence of loss aversion in the literature at large, has been recently questioned by studies reporting how loss aversion can disappear, and even reverse, as a function of the choice context. The present study investigated whether loss aversion reflects a trait-like attitude of avoiding losses or rather individuals' adaptability to different contexts. We report three experiments investigating the within-subject context sensitivity of loss aversion in a two-alternative forced-choice task. Our results show that the choice context can shift people's loss aversion, though somewhat inconsistently. Moreover, individual estimates of loss aversion are shown to have a considerable degree of stability. Altogether, these results indicate that even though the absolute value of loss aversion can be affected by external factors such as the choice context, estimates of people's loss aversion still capture the relative dispositions toward gains and losses across individuals.
Public Significance StatementLoss aversion is a core feature of prospect theory, and is widely relied upon by researchers and practitioners when characterizing the causes behind real-world phenomena; for example, why people generally dislike stocks despite them having higher returns than risk-free bonds. The present work shows systematic changes in loss aversion across contexts, alongside stable individual differences. These results legitimize the comparison of people's loss aversion relative to one another, while undermining the comparability of estimates to different contexts.