To further test their hypothesis, Chib and his colleagues decided to measure how loss-averse each participant was. They had the participants play a coin-flip game in which there was an equal chance they could win or lose varying amounts of money.
Each participant was offered varying potential win-loss amounts ($20-$20, $20-$10, $20-$5, for example), and then given the opportunity to either accept each possible gamble or decline it. The win-loss ratio at which the subjects chose to take the gamble provided a measure of how loss-averse each person was; someone willing to gamble even when they might win or lose $20 is less loss-averse than someone who is only willing to gamble if they can win $20 but only lose $5.
Once the numbers had been crunched and compared to the original experiment, it turned out that the more averse a participant was, the worse they did on the task when the stakes were high. And for a particularly loss-aversive person, the threshold at which their performance started to decline did not have to be very high. "If you're more loss-averse, it really hurts you," Chib says. "You're going to reach peak performance at a lower incentive level, and your performance is also going to be worse for higher incentives."
"Previously, it's been shown that the ventral striatum is involved in mediating performance increases in response to rising incentives," says John O'Doherty, professor of psychology and coauthor of the paper. "But o
|Contact: Deborah Williams-Hedges|
California Institute of Technology