Individual Differences in Loss Aversion: Conscientiousness Predicts How Life Satisfaction Responds to Losses Versus Gains in Income

Citation

Boyce CJ, Wood AM & Ferguson E (2016) Individual Differences in Loss Aversion: Conscientiousness Predicts How Life Satisfaction Responds to Losses Versus Gains in Income. Personality and Social Psychology Bulletin, 42 (4), pp. 471-484. https://doi.org/10.1177/0146167216634060

Abstract
Loss aversion is considered a general pervasive bias occurring regardless of the context or the person making the decision. We hypothesized that conscientiousness would predict an aversion to losses in the financial domain. We index loss aversion by the relative impact of income losses and gains on life satisfaction. In a representative German sample (N = 105,558; replicated in a British sample, N = 33,848), with conscientiousness measured at baseline, those high on conscientiousness have the strongest reactions to income losses, suggesting a pronounced loss aversion effect, whereas for those moderately unconscientious, there is no loss aversion effect. Our research (a) provides the first evidence of personality moderation of any loss aversion phenomena, (b) supports contextual perspectives that both personality and situational factors need to be examined in combination, (c) shows that the small but robust relationship between income and life satisfaction is driven primarily by a subset of people experiencing highly impactful losses.

Keywords
income; loss aversion; life satisfaction; subjective well-being; conscientiousness; personality

Journal
Personality and Social Psychology Bulletin: Volume 42, Issue 4

People

Dr Christopher Boyce

Honorary Research Fellow, SMS Management and Support