Loss aversion

Loss aversion is traditionally defined in the context of lotteries over monetary payoffs. This paper extends the notion of loss aversion to a more general setup where outcomes (consequences) may not be measurable in monetary terms and people may have fuzzy preferences over lotteries, i.e., they may choose in a probabilistic manner. The implications of loss aversion are discussed for expected utility theory and rank-dependent utility theory as well as for popular models of probabilistic choice such as the constant error/tremble model and a strong utility model (that includes the Fechner model of random errors and Luce choice model as special cases).