This paper studies two important reasons why people violate
procedure invariance, loss aversion and scale compatibility.
The paper extends previous research on loss aversion and
scale compatibility by studying loss aversion and scale
compatibility simultaneously, by looking at a new decision
domain, medical decision analysis, and by examining the effect
of loss aversion and scale compatibility on "well-contemplated
preferences." We find significant evidence both of loss aversion
and scale ...
This paper studies two important reasons why people violate
procedure invariance, loss aversion and scale compatibility.
The paper extends previous research on loss aversion and
scale compatibility by studying loss aversion and scale
compatibility simultaneously, by looking at a new decision
domain, medical decision analysis, and by examining the effect
of loss aversion and scale compatibility on "well-contemplated
preferences." We find significant evidence both of loss aversion
and scale compatibility. However, the sizes of the biases due
to loss aversion and scale compatibility vary over trade-offs
and most participants do not behave consistently according to
loss aversion or scale compatibility. In particular, the effect
of loss aversion in medical trade-offs decreases with duration.
These findings are encouraging for utility measurement and
prescriptive decision analysis. There appear to exist decision
contexts in which the effects of loss aversion and scale
compatibility can be minimized and utilities can be measured
that do not suffer from these distorting factors.
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