LOSS AVERSION

As a frequent subject of research, loss aversion gives thought to the perceived behaviour that one is more affected by losses than by gains leading to a steeper utility function for losses than for gains (Tversky and Kahneman, 1979). While some researchers have applied loss aversion to explain their results, (Benartzi and Thaler, 1995) (Götte et al., 2004) other researchers have had contradicting evidence (Hochman and Yechiam, 2011) (Erev et al., 2008). This paper will critically review the literature in order to show that while loss aversion has been able to prove various phenomena, more recent papers have put the generality and power of loss aversion into question. Although this paper does not claim nonexistence of loss aversion as some papers argue (Erev et al. 2008), it concludes that loss aversion is not as general as it was first considered to be.