Which of the following is NOT a good description of the phenomenon of Loss Aversion?
A) A risk neutral person will not accept any gamble that involves the possibility of a loss even if the expected value of the gamble (or even the expected utility) is positive.
B) The magnitude of value increase from a gain of a particular size is smaller than the magnitude of the value decrease from an equivalent loss.
C) The increase in value from a gain of a particular size is smaller than the increase in value from avoiding an equivalent loss.
D) People are risk seeking in losses and risk averse in gains.

Question

Quizplus · Accepted Answer

Loss aversion refers to the idea that people experience losses more intensely than gains of the same size, leading to behaviors aimed at avoiding losses rather than achieving equivalent gains. Choice A describes risk neutrality, not loss aversion, as it suggests a person would not accept a gamble with a positive expected value if it involves a loss, which does not capture the essence of loss aversion's impact on decision-making under risk.

Which of the Following Is NOT a Good Description of the Phenomenon