Loss aversion, diminishing Sensitivity, and the effect of experience on repeated decisions

Ido Erev*, Eyal Ert, Eldad Yechiam

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

133 Scopus citations


Three experiments are presented that explore the assertion that loss aversion and diminishing sensitivity drive the effect of experience on choice behavior. The experiments are focused on repeated choice tasks where decision makers choose repeatedly between alternatives and get feedback after each choice. Experiments 1a and 1b show that behavioral tendencies that were previously interpreted as indications of loss aversion in decisions from experience are better described as products of diminishing sensitivity to absolute payoffs. Experiment 2 highlights a nominal magnitude effect: A decrease in the magnitude of the nominal payoffs eliminates the evidence for diminishing sensitivity. These and related previous results can be captured with a model that assumes reliance on small samples of subjective experiences, and an increase in diminishing sensitivity with payoff variability.

Original languageAmerican English
Pages (from-to)575-597
Number of pages23
JournalJournal of Behavioral Decision Making
Issue number5
StatePublished - Dec 2008
Externally publishedYes


  • Explorative sampler
  • Learning
  • Myopic loss aversion
  • Prospect theory
  • Reflection effect


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