How does the mass public form attitudes on electoral rules and reforms? Existing research on this question reveals a trade-off between principles, such as fairness, and partisan self-interest. I use two survey experiments on state legislative redistricting to explore how voters weigh principles against partisan self-interest when forming opinions on electoral reforms. First, I ask whether the public’s partisan self-interest motivation stems more from individual representation considerations or broader partisan power considerations. I find that both considerations provide a powerful enough incentive to activate partisan self-interest regarding preferences for state legislative district maps. Unexpectedly, the two considerations have quite similar effects on public support for redistricting reforms. Second, I explore the principles versus partisan self-interest trade-off through the lens of loss aversion, a concept developed in behavioral economics. In line with expectations, I find that preventing loss provides a more powerful incentive for Americans to violate democratic principles than achieving partisan gain. In sum, this research sheds light on voters’ decision between principles and partisan self-interest in the formation of opinion on electoral reform.

Households are frequently subject to income and asset shocks. We performed a lab experiment, inducing losses on a real effort task, after which we measured cognitive performance, loss aversion and cheating behavior. We found that asset losses, but not income losses, act as a cognitive load, by decreasing accuracy and increasing response times. We did not detect any change in dishonesty or loss aversion.

The literature on rent-seeking primarily focuses on contests for achieving gains, although contests for avoiding losses are also omnipresent. Examples for such ‘reverse’ contests are activities to prevent the close-down of a local school or the construction of a waste disposal close-by. While under standard preferences, investments in ‘reverse’ and ‘conventional’ contests should not be different, loss aversion predicts contests for avoiding losses to be fiercer than conventional ones. In our experimental data, the difference in investments between conventional and reverse Tullock contests is small and statistically insignificant. We discuss several explanations for this remarkable finding.

It has been observed that, in a variety of tasks, losses have a larger impact on behavior than do gains of equal size. This phenomenon is referred to as loss aversion. It is thought that the negativity bias in behavior is reflected in and potentially causally related to a negativity bias in emotional arousal. We examine skin conductance responses—a psychophysiological marker for emotional arousal—during the anticipation of gains and losses. In contrast to most previous research, gains and losses were separated from each other and symmetric in magnitude. We found that skin conductance responses during the anticipation phase increased with the magnitude of both gains and losses. Contrary to the predictions of the loss aversion hypothesis, the anticipation of a loss did not elicit stronger reactions than the anticipation of a gain of equal size.

This paper studies individuals’ preference for reducing advantageous inequality in the distribution of gains and losses. Combining the inequality aversion model of Fehr and Schmidt (Q J Econ 114(3):817–868, 1999) with loss aversion à la Kahneman and Tversky (Econom J Econom Soc:263–291, 1979), we predict the relative dislike for advantageous inequality is lower when outcomes are framed as losses than when outcomes are framed as gains. We test this prediction using data from two modified dictator game experiments. Consistent with the model, we find that the amount of payoff that subjects are willing to sacrifice to increase the net payoff of others and reduce advantageous inequality is smaller under a loss frame than under a gain frame. The results also show that women are more inequality averse than men in both gains and losses.

We study the relative effectiveness of contracts that are framed either in terms of bonuses or penalties. In one set of treatments, subjects know at the time of effort provision whether they have achieved the bonus/avoided the penalty. In another set of treatments, subjects only learn the success of their performance at the end of the task. We fail to observe a contract framing effect in either condition: effort provision is statistically indistinguishable under bonus and penalty contracts.

We investigate the implications of penalizing incorrect answers to multiple-choice tests, from the perspective of both test-takers and test-makers. To do so, we use a model that combines a well-known item response theory model with prospect theory (Kahneman and Tversky, Prospect theory: An analysis of decision under risk, Econometrica 47:263–91, 1979). Our results reveal that when test-takers are fully informed of the scoring rule, the use of any penalty has detrimental effects for both test-takers (they are always penalized in excess, particularly those who are risk averse and loss averse) and test-makers (the bias of the estimated scores, as well as the variance and skewness of their distribution, increase as a function of the severity of the penalty).

Developing countries, with limited monitoring and auditing capabilities, face significant tax evasion issues. This study examines the impact of various text message combinations on promoting tax compliance, particularly in encouraging service providers to submit monthly sales tax returns in Khyber Pakhtunkhwa, Pakistan. A randomised controlled trial involved 18,087 service providers and tested three types of SMS reminders. These included a basic reminder for the due date, a reciprocity message emphasising social responsibility, and a loss aversion (LA) message highlighting financial penalties and deactivation. Subsequently, service providers who didn’t file on time received one of three warning messages. These warnings included a basic alert about potential legal action, financial penalties, and deactivation, as well as a message framing continued non-compliance as an active choice (AC). Overall, the interventions did not significantly influence tax filing behaviour beyond basic reminders and warnings. However, compliance improved for early registrants with the LA reminder and AC warning, and these results were robust to multiple hypothesis testing corrections. Compliance worsened for recent registrants in all combinations except the LA reminder and AC warning. These findings suggest that targeted low-cost messages that convey vague threats can improve tax compliance among certain taxpayer groups.

People are psychologically predisposed to minimize their losses, even in the face of substantial gains. This predisposition, referred to as ‘loss aversion’, is especially present when people face uncertain outcomes. In small-scale fisheries, where fishers’ decisions are influenced by monetary and non-monetary assets, exploring how loss aversion intersects with conservation efforts may offer insights into how fishers balance short-term and long-term priorities. This study assessed the variables that contribute to loss aversion of small-scale fishers when making trade-offs between two valued assets: information-sharing and catch success. We used a structured questionnaire and a hypothetical simple lottery choice task of 78 fishers across 20 fishing beaches in Jamaica. We found that fishers were marginally more loss averse when both information-sharing opportunities and catch success were threatened than when only catch success was threatened. Communication frequency and size of fishing crew contributed significantly to fishers’ loss aversion in most choice sets, regardless of whether materially or non-materially valued assets were threatened. By exploring the drivers underpinning fishers’ choices, we provide insights into how the consideration of these variables can support the development of fisheries conservation measures that better align with the decision priorities of fishers.

The effectiveness and uptake of financial incentives can differ substantially between reward- and deposit-based incentives. Therefore, it is unclear to whom and how different incentives should be assigned. In this study, the effect of different modes of assigning reward- and deposit-based financial incentives on effort is explored in a two-session experiment. First, students’ (n = 228, recruited online) discounting, loss aversion and willingness to pay a deposit were elicited. Second, an incentivized real-effort task was completed (n = 171, 25% drop-out). Two modes of assigning reward- or deposit-based financial incentives were compared: random assignment and ‘nudged’ assignment – assignment based on respondent characteristics allowing opting out. Our results show that respondents receiving nudged assignment earned more and persisted longer on the real-effort task than respondents randomly assigned to incentives. We find no differences in effectiveness between reward-based or deposit-based incentives. Overall, 39% of respondents in the nudged assignment mode followed-up the advice to take deposit-based incentives. The effect of deposit-based incentives was larger for the respondents who followed-up the advice than for respondents that randomly received deposit-based incentives. Overall, these findings suggest that nudged assignment may increase incentives’ effect on effort. Future work should extend this approach to other contexts (e.g., behaviour change).

Several papers have challenged the robustness of loss aversion, claiming that it is context-dependent and disappears for small stakes. These papers use a behavioral definition of loss aversion that may be confounded by diminishing sensitivity and probability/event weighting under the new version of prospect theory (PT). We perform a new theory-based test of loss aversion that controls for these confounds. We found significant loss aversion for both small stakes and high stakes. The overall loss aversion coefficient varied between 1.25 and 1.45, less than commonly observed. Loss aversion decreased slightly for small stakes, but the effect was small and usually insignificant. Overall, our results indicate that, under PT, loss aversion is robust to stake size.

Individuals are generally reluctant to trade goods—a phenomenon identified as the endowment effect. This paper focuses on consumers’ puzzling reluctance to exchange gambles, and in particular lottery tickets with identical distribution (i.e., same odds of winning), and identifies the ticket’s vividness as an important moderator. Three studies demonstrate that individuals are more willing to exchange less vivid lottery tickets (e.g., tickets concealed in envelopes, or tickets with an unknown number) compared to more vivid tickets (e.g., tickets not concealed in envelopes, or tickets with a known number) when offered an incentive to exchange. Moreover, this effect is mediated by anticipated regret, such that less regret is anticipated when exchanging less vivid tickets, thus increasing individuals’ willingness to exchange tickets.

Work on procedural utility suggests that decision makers derive more value from outcomes earned with freedom of choice. We experimentally tested tradeoffs between procedural and outcome utility, examining financial losses as an important boundary condition. Participants completed a simulated consumer sales task (Exp. 1) or card task (Exp. 2) with or without choice. Participants reported their satisfaction with monetary outcomes. When given choice, participants reported greater self-determination. Participants also reported higher outcome satisfaction, but only for gains. Choice did not influence satisfaction for losses. In Experiment 2, Participants also preferred choice when selecting between financial gains. However, when choice was costly (large disparity in pay) or posed losses, most participants sacrificed choice for better payoffs. Results are consistent with a cognitive model in which participants shift their attention from procedural utilities to financial outcomes when faced with losses. Financial outcomes may take precedence over choice when financial outcomes are threatened.

We employed simple gambles to investigate information processing in relation to the compatibility effect. Subjects should be more likely to engage in a deliberative thinking strategy when completing a pricing task rather than a rating task. We used eye-tracking methodology to measure information acquisition and processing in order to test the above hypothesis as well as to show that losses and alternatives with uncertain outcomes are more likely than gains and alternatives with sure outcomes to be processed through a deliberative thinking process. Results showed that pupil dilations, fixation duration and number of fixations increased when subjects evaluated the gambles with a pricing task. Additionally, the number of fixations increased as the gamble outcome became increasingly negative and when the outcome was uncertain (vs. sure). Fixations were also predictive of subjects’ final evaluations of the gambles. We discuss our results in light of the cognitive processes underlying different response modes in economic preferences.

This study employs a Discrete Choice Experiment (DCE) in the health-care sector to test the loss aversion theory that is derived from reference-dependent preferences: The absolute subjective value of a deviation from a reference point is generally greater when the deviation represents a loss than when the same-sized change is perceived as a gain. As far as is known, this paper is the first to use a DCE to test the loss aversion theory. A DCE is a highly suitable tool for such testing because it estimates the marginal valuations of attributes, based on deviations from a reference point (a constant scenario). Moreover, loss aversion can be examined for each attribute separately. Another advantage of a DCE is that is can be applied to non-traded goods with non-tangible attributes. A health-care event is used for empirical illustration: The loss aversion theory is tested within the context of preference structures for maternity-ward attributes, estimated using data gathered from 3850 observations made by a sample of 542 women who had recently given birth. Seven hypotheses are presented and tested. Overall, significant support for behavioral loss aversion theories was found.

The impact of default options on choice is a reliable, well-established behavioral finding. However, several different effects may lend to choosing defaults in an often indistinguishable manner, including loss aversion, inattention, information leakage, and transaction costs associated with switching. We introduce the notion of the “default pull” as the effect that even subtle default options have on decision makers’ uncertainty about their own preferences. The default pull shapes what a decision maker prefers by causing her to consider whether she prefers the default. We demonstrate default pull effects using a simple decision making task that strips away many of the usual reasons that defaults could affect choices, and we show that defaults can have substantial effects on choice, even when the default itself was not chosen.

In two studies, people were reluctant to trade items they own, but glad to accept upgrades with identical end states. The framing of the transaction makes a difference. A mediational analysis suggests that the relationship between the frame of the transaction and measures of value (willingness to accept, WTA) depends on perceived losses. Losses are perceived as greater when the transaction is a trade than as an upgrade. We manipulated perceptions of loss across descriptions of transactions and found that, when the difference in perceptions of losses with trades versus upgrades was large, framing effects were strong. But when the difference was small, framing effects disappeared. These framing effects with identical end states influence WTA because trades are associated with perceived losses, while upgrades are associated with perceived costs.

This study examined framing effects in decisions concerning public health. Tversky and Kahneman’s famous Asian Disease Problem served as experimental paradigm. Subjects chose between a sure and a risky option either presented as gains (saving lives) or as losses (dying). The amount of risk varied in terms of different probabilities. The number of affected people was either small (low need) or large (high need). Additionally, the decisions were linked to three different types of diseases (unusual infection, AIDS, leukemia). We also implemented two different time constraints during which the subjects had to give a response. Finally, we tested a within-subject design. The data analysis assuming a linear mixed effects model revealed significant effects of framing, probabilities, and need. Furthermore, the type of disease and time constraints were moderating the framing effect. Across the different diseases, framing effects were amplified when decision time was short.