Losses loom more likely than gains: propensity to imagine losses increases their subjective probability

Abstract

Losses loom larger than gains. The typical interpretation of loss aversion involves a subjective value-based asymmetry between gains and losses, with individuals expecting losses to be more painful than gains of equal size to be pleasurable. This paper reveals a novel, subjective probability-based asymmetry between gains and losses that may contribute to loss aversion in risky choice. Results from five experiments suggest that losses may loom not only larger, but also more likely than gains. The propensity of losses to attract attention and to be subsequently imagined appears to underlie the proposed asymmetry. The effect translates into changes in predicted behavior, with subjective probability mediating the impact of imagination on the predicted likelihood to accept to play an equal-probability gamble. The implications of our findings for loss aversion, the negativity bias, and the imagination literature are discussed.