Choice by Value Encoding and Value Construction: Processes of Loss Aversion

Martijn C. Willemsen*, Ulf Böckenholt, Eric J. Johnson

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

48 Scopus citations


Loss aversion and reference dependence are 2 keystones of behavioral theories of choice, but little is known about their underlying cognitive processes. We suggest an additional account for loss aversion that supplements the current account of the value encoding of attributes as gains or losses relative to a reference point, introducing a value construction account. Value construction suggests that loss aversion results from biased evaluations during information search and comparison processes. We develop hypotheses that identify the influence of both accounts and examine process-tracing data for evidence. Our data suggest that loss aversion is the result of the initial direct encoding of losses that leads to the subsequent process of directional comparisons distorting attribute valuations and the final choice.

Original languageEnglish (US)
Pages (from-to)303-324
Number of pages22
JournalJournal of Experimental Psychology: General
Issue number3
StatePublished - Aug 2011


  • Decision making
  • Loss aversion
  • Multilevel analysis
  • Preference construction
  • Process tracing

ASJC Scopus subject areas

  • Experimental and Cognitive Psychology
  • Developmental Neuroscience
  • General Psychology


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