I read him, he is just incorrect. “People hate losses more than they hate gains” is not explained by DMU. They dislike losses to an extent far greater than predicted by DMU, and more importantly, this dislike is largely scale invariant.
If you go read papers like the original K&T, you’ll see that their data set is just a bunch of statements that are predicted to be equally preferrable under DMU (because marginal utility doesn’t change much for small changes in wealth). What changes the preference is simply whether K&T phrase the question in terms of a loss or a gain.
So...unsurprisingly, Kahneman is accurately describing the theory that won him the Nobel prize.
The author explain very clearly what the differences are between “people hate losses more than they like gains” and loss aversion. Loss aversion is people hating losing $1 while having $2 more than they like gaining $1 while having $1, even though it both case this the difference between having $1 and $2.
I read him, he is just incorrect. “People hate losses more than they hate gains” is not explained by DMU. They dislike losses to an extent far greater than predicted by DMU, and more importantly, this dislike is largely scale invariant.
If you go read papers like the original K&T, you’ll see that their data set is just a bunch of statements that are predicted to be equally preferrable under DMU (because marginal utility doesn’t change much for small changes in wealth). What changes the preference is simply whether K&T phrase the question in terms of a loss or a gain.
So...unsurprisingly, Kahneman is accurately describing the theory that won him the Nobel prize.
The author explain very clearly what the differences are between “people hate losses more than they like gains” and loss aversion. Loss aversion is people hating losing $1 while having $2 more than they like gaining $1 while having $1, even though it both case this the difference between having $1 and $2.