Arguably, perhaps the most straightforward test of loss aversion is to simply ask people to evaluate the impact of losing versus gaining the same object. However, when researchers have examined how people rate the impact of losing versus gaining the same amount of money, little support for loss aversion has emerged (Harinck, Van Dijk, Van Beest, & Mersmann, 2007; Liberman, Idson, & Higgins, 2005; Mellers, Schwartz, & Ritov, 1999; Mukherjee, Sahay, Pammi, & Srinivasan, 2017; Rozin & Royzman, 2001). For example, Rozin and Royzman (2001) write: “In its boldest form, losing $10 is worse than winning $10 is good. Although we are convinced of the general validity of loss aversion, and the prospect function that describes and predicts it, we confess that the phenomenon is only realizable in some frameworks. In particular, strict loss and gain of money does not reliably demonstrate loss aversion (unpublished data by the authors)” (Rozin & Royzman, 2001, p. 306). In fact, with low stakes, gains actually appear to loom larger than losses when using this paradigm (e.g., Harinck et al., 2007).
Whereas past work has focused on a comparison between losing versus gaining monetary amounts, we have recently examined how people react to losing nonmonetary objects (Gal & Rucker, 2017b). For example, how do people rate the impact of losing versus gaining a mug? For most everyday objects we examined (mugs, flashlights, notebooks), the positive impact anticipated from gaining the object was rated to be greater than the negative impact anticipated from losing the object. For example, using a scale ranging from !5 (“extremely negative”) to +5 (“extremely positive”) to describe their feelings, participants who rated their feelings about losing a mug said their feelings would be less affected (M = 1.38) than did participants who rated their feelings if they were to gain a mug (M = 2.71). Notably, for some objects, we found no statistical difference between the impact of gains versus losses (a watch, a mountain view, lakefront access), and for no object did we find losses were rated to be more impactful than gains.
McGraw, Larsen, Kahneman, and Schkade (2010) attempted to reconcile the inconsistency of such findings with loss aversion. Specifically, the authors proposed that losses and gains are evaluated on different subjective scales. Consequently, the comparison of the impact of a loss evaluated independently with the impact of a gain evaluated independently does not provide a fair relative comparison of the impact of losses versus gains. Instead, they argue for a fair comparison, the loss and gain of an object need to be evaluated jointly with respect to each other. To this end, McGraw et al. (2010) asked participants to evaluate the relative impact of losing versus gaining the same amount of money; for example, they asked participants which of losing or gaining $50 they thought would be more impactful. With this approach, McGraw et al. (2010) identified a pattern of results consistent with loss aversion: the majority of participants stated that the loss of money would be more impactful than its gain. [...]
... an important caveat is in order. Namely, the studies of McGraw et al. (2010) involved potentially significant amounts of money for the participants involved (i.e., $50 and $200 for undergraduates). As noted previously, when large amounts of money are involved, loss aversion is indistinguishable from risk aversion for changes in wealth, which is fully consistent with rational choice theory (cf. Rabin & Thaler, 2001). To put this in context, if losing $50 is more likely to impact one’s lifestyle and wellbeing than gaining $50 is likely to impact it, then it is perfectly rational that individuals would be more psychologically impacted by losing $50 than by gaining $50. However, it is assumed that the loss versus gain of small amounts of money do not differentially impact one’s objective wellbeing, and hence, it is considered irrational for losses to loom larger than gains when small amounts of money are involved (Rabin & Thaler, 2001).
Indeed, in a recent paper by Mukherjee et al. (2017), the authors replicated the procedure of McGraw et al. (2010) with low stakes. They observed that when stakes were low, gains were rated as having more psychological impact than losses. Conversely, when stakes were high, Mukherjee et al. (2017) found that participants tended to rate losses as more impactful than gains. Thus, consistent with the possibility of contextual factors affecting the relative impact of losses and gains, the findings of Mukherjee et al. suggest a moderator of when losses loom larger than gains. On the other hand, the definitiveness of this moderator must be tempered by potential concerns about the validity of the particular methodology used for testing the impact of losses versus gains and the fact that for high stakes it is difficult to distinguish risk aversion from differences in the psychological impact of losses and gains. Finally, in recent work (Gal & Rucker, 2017b), we also asked participants to rate the impact of gaining and losing various goods using McGraw et al.’s procedure. Although our results varied based on the nature of the good, we found no evidence for a predominance for losses to loom larger than gains.