LOSS AVERSION

-GROUP 8, CB-A
Ridhima Dutta, C017
Anshu Jain, C025
Rajsantosi Mohapatra, C041
Archit Chitransh, H009
Snehil Dagur, H010
Ashutosh Singh, H055
Apoorva Somani, H058
What is Loss Aversion??
 People are motivated by avoiding a loss than acquiring a similar
gain
 If a person were given two equal choices, one expressed in terms of possible
gains and the other in possible losses, people would choose the former
 If you ask new investors to invest into equity market, the first response they
will give is this – “No, I don’t want to fall prey to the losses of equity
market.”
 People don’t sell their stocks even if they are making losses. They will not book
losses and exit the investment.
Experiment
Asking strangers to play a simple game of cards for money in which they loose
money if they loose but get a reward if they win the game

• Played the game without any loss angle

Control Group • They only won after each round

• Introduced monetary loss to the

Test Group outcome of the game

• Location: Vile Parle East, Mumbai

• Stalls Approached: 2
• Number of Subjects: 25 (20 Test, 5 Control; Within Subjects Design)
• Roadblock: Convincing the people to give their time to play the game
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Results
Hypothesis: Test group would be quicker to drop the game in between

Participant Exit
30

25

20

15

10

0
Win Rs. 50 Win Rs. 50, Lose Rs. Win Rs. 50, Lose Rs. Win Rs. 50, Lose Rs.
20 40 60
Participant Exit
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Results
Gender Results
16

14

12

10

0
Win Rs. 50 Win Rs. 50, Lose Rs. Win Rs. 50, Lose Rs. Win Rs. 50, Lose
20 40 Rs.60
Male Female

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Results
Age Results
14

12

10

0
Win Rs. 50 Win Rs. 50, Lose Rs. Win Rs. 50, Lose Rs. Win Rs. 50, Lose
20 40 Rs.60
Age < 25 25 - 35 Age > 35

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Results
 Apart from this, income level also seems to be a very important factor
on the decision of the participant

 The younger the person, the more risk taking the person tends to be

 The incentive also matters – direct cash motivated the user the most
to quickly to take the bet

 We tried the same experiment with chocolates but no one was ready to
invest their time in the study

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Research Gaps
 It would be very difficult to replicate loss aversion in the consumer
goods segment because the pain of loss is negligible.

 On the other hand, we can look at equity ventures who try to jump
into business with a new startup working on something niche or
unique so that they do not miss on an opportunity\

 Scarcity along with Loss Aversion would be a very powerful

combination
 This can especially be used while designing the UI/UX of Ecommerce sites

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THANK YOU