Identify a true statement about loss aversion.
A)It helps to explain the endowment effect and the sunk cost fallacy among people.
B)It emphasizes that people make more losses than gains in their lives.
C)It is the tendency to report falsely,after the fact,that one accurately predicted an outcome.
D)It is the tendency to report falsely about a loss in order to gain sympathy and escape punishment.

Question

Quizplus · Accepted Answer

Loss aversion is the tendency for people to prefer avoiding losses over acquiring equivalent gains. This tendency helps to explain the endowment effect (the fact that people value things they own more than identical items they don't own) and the sunk cost fallacy (the fact that people will continue to invest in a project or decision even if it's no longer rational, because they've already invested so much time, money or effort into it). Option B is incorrect because loss aversion does not imply that people make more losses than gains in their lives. Option C and D are both incorrect because they describe different phenomena (hindsight bias and malingering, respectively) and are not related to loss aversion.

Identify a True Statement About Loss Aversion