Too Much to Lose: The Influence of Emotional Attachment on Risk Aversion

Current literature suggests that the generalizability of the loss aversion hypothesis and in tandem risk aversion and framing effects may be less stable than previously specified. Hence, the current study seeks to investigate emotional attachment as a potential moderator of loss and subsequently risk aversion, helping inform both fields of economics and psychology in driving better policy and decision-making. 64 Temasek Polytechnic students, aged 16-23, were manipulated with either high or low emotional attachment towards an item and presented with an adapted Asian Disease Paradigm (Tversky & Kahneman, 1981) in either a gain or loss frame as a measure of the individual’s mean risk rating. ANOVA analysis revealed the stability of the loss aversion hypothesis identified in past literature – risk-averse behavior increased when a gain frame was presented, and risk-seeking behavior increased when a loss frame was presented. Critically, emotional attachment was found to moderate loss and risk aversion, validating past theoretical derivations (Ariely, Huber, & Wertenbroch, 2005; Novemsky & Kahneman, 2005): when emotional attachment was higher towards an item, participants displayed more risk-seeking behavior and more risk-averse behavior when in the context of losses and gains respectively, and displayed less risk-seeking and risk-averse behavior when they were less emotionally attached to an item in the same context of a gamble. Theoretical and practical implications of these findings are discussed in the context of nudging.