Related Experiment Video
Updated: Oct 26, 2025

Measuring the Subjective Value of Risky and Ambiguous Options using Experimental Economics and Functional MRI Methods
Published on: September 19, 2012
Myopic loss aversion or equate-to-differentiate heuristic? A heuristic decision making model for both single and
Lei Zhao1, Junhui Ye2, Liuqing Yang1
1Zhejiang University of Technology.
Abstract:
Myopic loss aversion (MLA)-a combination of myopic loss and a greater sensitivity to losses than gains-has been proposed to explain the equity premium puzzle and then extended to myopic prospect theory (MPT). However, such an expected-value/utility-based theory has been challenged and the underlying mechanism remains debatable. In the current study, we applied the modified equate-to-differentiate model to address this phenomenon. In Experiment 1, we first directly explored the relationship between individuals' degree of loss aversion and their investment amounts in risky lotteries for both single and repeated plays. We found no correlations between these variables; this was inconsistent with the MLA/MPT prediction. Experiment 2 showed that individuals' evaluation scores of the differences within the dimension (probability or outcome) that has larger differences highly predicted their investment behavior, which supported the equate-to-differentiate model.
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