The Influence of Decision Context and Comparability on Judgements of Gain and Loss

Loss aversion is a psychological phenomenon whereby loss decisions are weighted greater than the equivalent gain decisions (Kahneman & Tversky, 1979; Tversky & Kahneman, 1992). Recent research by McGraw, Larsen, Kahneman and Schkade (2010)
revealed that the occurrence of loss aversion relies on psychological measures and scales. Specifically, loss aversion was present only
when there was a possibility for comparing losses and gains directly (employing unipolar scales) – contextual comparability. Previous studies, however, explored the variation of risky preferences as a function of psychological comparability (Stewart, Chater & Brown, 2006; Kusev, van Schaik,Ayton, Dent & Chater, 2009; Kusev & van Schaik, 2011). Experiment one was designed to test loss aversion for judgements of feelings with non-monetary and monetary, unipolar
and bipolar scales. We found that the mismatch (non-comparability) between perceived decision scenario and judged decision content eliminates loss aversion. Experiment two further explored the
psychological comparability hypothesis by controlling for levels of comparability between perceived decision scenario and judged decision content. The results revealed inconsistent loss aversion; psychological comparability (between perceived decision scenario and evaluated decision content) and not contextual comparisons fuelled loss averse judgements