LOSS AVERSION FOR TIME-SENSITIVE AND VALUE DEPRECIATING (TSVD) GOOD: AN INTRODUCTION OF LOSS AVERSION SENSITIVITY (LAS)

Abstract

In a market setting where trade of TSVD good such as the movie ticket is involved, consumers set selling price lower than buying price – a phenomenon known as the reversal of loss aversion. And uncertain information in an unknown (partial information) or known (full information) format has no influence on the prices the consumers set when it comes to TSVD good. We observed that consumers’ decision making seems to be entirely shrouded by the overwhelming fear in losing out the opportunity to reclaim any monetary value back when full depreciation of the TSVD good is realized. This paper empirically tested four hypotheses and concluded that a revseral of loss aversion is observed regardless of the consumers’ first undertaken role, or the extent of knowledge. To the end, the author seeks to introduce a model – the Loss Aversion Sensitivity – to explain the reversal of loss aversion.