When Gains Exceed Losses: Attribute Trade-Offs and Prospect Theory

Taihoon Cha, Hankuk University of Foreign Studies
Praveen Aggarwal, University of Minnesota Duluth
ABSTRACT - One of the central tenets of Prospect Theory is the concept of loss aversionC the psychological impact of loss is bigger than that of an equivalent gain. However, empirical support for loss aversion has been mixed in the literature. In this paper we extend Prospect Theory by introducing two variables that moderate the occurrence of loss aversionC quality-tiers and confidence in price information. We demonstrate that loss aversion for price occurs for low-tier brands only. We also show that the effect of price-tiers on loss aversion is moderated by the confidence consumers have in their price information. More confident consumers react more strongly to price changes than the less confident ones.
[ to cite ]:
Taihoon Cha and Praveen Aggarwal (2003) ,"When Gains Exceed Losses: Attribute Trade-Offs and Prospect Theory", in NA - Advances in Consumer Research Volume 30, eds. Punam Anand Keller and Dennis W. Rook, Valdosta, GA : Association for Consumer Research, Pages: 118-124.