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Thinking like a trader selectively reduces individuals' loss aversion

Sokol-Hessner, Peter and Hsu, Ming and Curley, Nina G. and Delgado, Mauricio R. and Camerer, Colin F. and Phelps, Elizabeth A. (2009) Thinking like a trader selectively reduces individuals' loss aversion. Proceedings of the National Academy of Sciences of the United States of America, 106 (13). pp. 5035-5040. ISSN 0027-8424. PMCID PMC2656558. doi:10.1073/pnas.0806761106.

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Research on emotion regulation has focused upon observers' ability to regulate their emotional reaction to stimuli such as affective pictures, but many other aspects of our affective experience are also potentially amenable to intentional cognitive regulation. In the domain of decision-making, recent work has demonstrated a role for emotions in choice, although such work has generally remained agnostic about the specific role of emotion. Combining psychologically-derived cognitive strategies, physiological measurements of arousal, and an economic model of behavior, this study examined changes in choices (specifically, loss aversion) and physiological correlates of behavior as the result of an intentional cognitive regulation strategy. Participants were on average more aroused per dollar to losses relative to gains, as measured with skin conductance response, and the difference in arousal to losses versus gains correlated with behavioral loss aversion across subjects. These results suggest a specific role for arousal responses in loss aversion. Most importantly, the intentional cognitive regulation strategy, which emphasized “perspective-taking,” uniquely reduced both behavioral loss aversion and arousal to losses relative to gains, largely by influencing arousal to losses. Our results confirm previous research demonstrating loss aversion while providing new evidence characterizing individual differences and arousal correlates and illustrating the effectiveness of intentional regulation strategies in reducing loss aversion both behaviorally and physiologically.

Item Type:Article
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URLURL TypeDescription CentralArticle
Camerer, Colin F.0000-0003-4049-1871
Additional Information:© 2009 by the National Academy of Sciences. Edited by Edward E. Smith, Columbia University, New York, NY, and approved February 4, 2009 (received for review July 19, 2008). This research was sponsored by a James S. McDonnell Foundation grant to E.A.P., Moore Foundation and Human Frontier Science Program grants to C.F.C., and a National Science Foundation Graduate Research Fellowship to P.S.H.
Funding AgencyGrant Number
James S. McDonnell FoundationUNSPECIFIED
Gordon and Betty Moore FoundationUNSPECIFIED
Human Frontier Science ProgramUNSPECIFIED
Subject Keywords:arousal; emotion regulation; decision-making
Issue or Number:13
PubMed Central ID:PMC2656558
Record Number:CaltechAUTHORS:20090709-081528726
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:14528
Deposited By: Tony Diaz
Deposited On:09 Jul 2009 21:39
Last Modified:08 Nov 2021 23:12

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