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The Psychological and Neural Basis of Loss Aversion

Sokol-Hessner, P; Rutledge, RB; (2019) The Psychological and Neural Basis of Loss Aversion. Current Directions in Psychological Science , 28 (1) pp. 20-27. 10.1177/0963721418806510. Green open access

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Abstract

Loss aversion is a central element of prospect theory, the dominant theory of decision making under uncertainty for the past four decades, and refers to the overweighting of potential losses relative to equivalent gains, a critical determinant of risky decision making. Recent advances in affective and decision neuroscience have shed new light on the psychological and neurobiological mechanisms underlying loss aversion. Here, integrating disparate literatures from the level of neurotransmitters to subjective reports of emotion, we propose a novel neural and computational framework that links norepinephrine to loss aversion and identifies a distinct role for dopamine in risk taking for rewards. We also propose that loss aversion specifically relates to anticipated emotions and aspects of the immediate experience of realized gains and losses but not their long-term emotional consequences, highlighting an underappreciated temporal structure. Finally, we discuss challenges to loss aversion and the relevance of loss aversion to understanding psychiatric disorders. Refining models of loss aversion will have broad consequences for the science of decision making and for how we understand individual variation in economic preferences and psychological well-being across both healthy and psychiatric populations.

Type: Article
Title: The Psychological and Neural Basis of Loss Aversion
Open access status: An open access version is available from UCL Discovery
DOI: 10.1177/0963721418806510
Publisher version: https://doi.org/10.1177%2F0963721418806510
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: loss aversion, well-being, prospect theory, decision making, emotion
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > School of Life and Medical Sciences
UCL > Provost and Vice Provost Offices > School of Life and Medical Sciences > Faculty of Brain Sciences
UCL > Provost and Vice Provost Offices > School of Life and Medical Sciences > Faculty of Brain Sciences > UCL Queen Square Institute of Neurology
UCL > Provost and Vice Provost Offices > School of Life and Medical Sciences > Faculty of Brain Sciences > UCL Queen Square Institute of Neurology > Imaging Neuroscience
URI: https://discovery.ucl.ac.uk/id/eprint/10075202
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