Editing Loss aversion (section)

== Expectation-based ==
Expectation-based loss aversion is a phenomenon in behavioral economics. When the expectations of an individual fail to match reality, they lose an amount of utility from the lack of experiencing fulfillment of these expectations. Analytical framework by Botond Kőszegi and Matthew Rabin provides a methodology through which such behavior can be classified and even predicted.<ref>{{Cite journal|last1=Kőszegi|first1=Botond|last2=Rabin|first2=Matthew|date=2006-11-01|title=A Model of Reference-Dependent Preferences|journal=The Quarterly Journal of Economics|language=en|volume=121|issue=4|pages=1133–1165|doi=10.1093/qje/121.4.1133|issn=0033-5533|citeseerx=10.1.1.197.5740}}</ref>  An individual's most recent expectations influences loss aversion in outcomes outside the status quo; a shopper intending to buy a pair of shoes on sale experiences loss aversion when the pair they had intended to buy is no longer available.<ref>{{Cite journal|last=Kahneman|first=David|date=1972|title=Subjective probability: A judgment of representativeness|journal=Cognitive Psychology|volume=3|issue=3|pages=430–454|doi=10.1016/0010-0285(72)90016-3}}</ref>

Subsequent research performed by Johannes Abeler, [[Armin Falk]], Lorenz Goette, and David Huffman in conjunction with the [[IZA Institute of Labor Economics|Institute of Labor Economics]] used the framework of Kőszegi and Rabin to prove that people experience expectation-based loss aversion at multiple thresholds.<ref>{{Cite journal|last1=Abeler|first1=Johannes|last2=Falk|first2=Armin|last3=Goette|first3=Lorenz|last4=Huffman|first4=David|s2cid=32974|date=2011-04-01|title=Reference Points and Effort Provision|journal=American Economic Review|volume=101|issue=2|pages=470–492|doi=10.1257/aer.101.2.470|issn=0002-8282|citeseerx=10.1.1.472.7268}}</ref> The study evinced that reference points of people causes a tendency to avoid expectations going unmet. Participants were asked to participate in an iterative money-making task given the possibilities that they would receive either an accumulated sum for each round of "work", or a predetermined amount of money. With a 50% chance of receiving the "fair" compensation, participants were more likely to quit the experiment as this amount approached the fixed payment. They chose to stop when the values were equal as no matter which random result they received, their expectations would be matched. Participants were reluctant to work for more than the fixed payment as there was an equal chance their expected compensation would not be met.<ref>{{Cite journal|last=Voslinsky|first=Alisa|date=February 13, 2005|title=Beliefs and social behavior in a multi-period ultimatum game|journal=Frontiers in Behavioral Neuroscience|volume=9|page=29|doi=10.3389/fnbeh.2015.00029|pmid=25762909|pmc=4327742|doi-access=free}}</ref>