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- Title
Development of a Loss Aversion Scale.
- Authors
Jin Li; Chai, Linlin; Nordstrom, Onnolee; Tangpong, Chanchai; Kuo-Ting Hung
- Abstract
Although loss aversion has been shown to be a pervasive phenomenon in economics, business, and management, measuring individual loss aversion tendency has proven challenging because it requires complex and lengthy experiments and data collections. To address this, this study develops a seven-item loss aversion scale, which is simple and unidimensional. The study validates the scale by correlating it with two other decision-making tendency scales - risk aversion and risk propensity, and tests the predictive validity through two behavioral tendency statements (i.e., the sunk cost fallacy and the endowment effect) and four lottery games. The overall results suggest that the scale is a reliable and valid instrument that can be used to assess an individual's loss aversion tendency in place of more complex behavioral experiments. The paper discusses the managerial implications of the scale in various business areas and suggests future research directions for further validating the scale.
- Subjects
LOSS aversion; PREDICTIVE validity; RISK aversion; PREDICTIVE tests; TEST validity
- Publication
Journal of Managerial Issues, 2021, Vol 33, Issue 1, p69
- ISSN
1045-3695
- Publication type
Article