Loss Aversion λ Coefficient (Prospect Theory)

Calculate or estimate the loss aversion parameter λ from Kahneman-Tversky prospect theory, where the disutility of a loss is λ times the utility of an equivalent gain. Typical estimates put λ at approximately 2.0–2.5

Each component has a specific meaning:

• Kahneman-Tversky prospect theory — The kahneman-tversky prospect theory recorded for the scenario being assessed.
• Where the disutility of a loss is λ times the utility of an equivalent gain — The where the disutility of a loss is λ times the utility of an equivalent gain recorded for the scenario being assessed.

Note: Interpret the loss aversion λ result against the thresholds and context described above.

Enter the Kahneman-Tversky prospect theory, where the disutility of a loss is λ times the utility of an equivalent gain for the scenario you are assessing. Calculate or estimate the loss aversion parameter λ from Kahneman-Tversky prospect theory, where the disutility of a loss is λ times the utility of an equivalent gain. Typical estimates put λ at approximately 2.0–2.5. Use the loss aversion λ result to inform your calculation.