The Loss Aversion And The Change Mechanism Of Individual Adventure In The Negative Reference Point

Kahneman and Tversky developed an approach to risky decision making known asprospect theory. The major assumptions of the theory are contained in the value function.According to the value function, people show loss aversion, i.e., they are much moresensitive to potential losses than potential gains. Loss and gain is relative to the referencepoint. Loss aversion, reference point and individual adventure are related to each of thewhole. This research has compared the two explanation viewpoint of loss aversion: theview of reference point and the view of route, and also discusses the change mechanismof individual adventure in the negative reference point, and thereby deduced the changesof value function in the negative reference point.This research divide into two parts were five experiments. Conclusions are made asfollows:1. Loss aversion was affected by both reference point and route, and can’t explainedby each alone. When the route of gains is greater than that of losses and when it is in thenegative reference point, loss aversion will not happen.2. In general, individual adventure is reducing as the reference point moves intonegative.3. As the reference point moves into negative, in the early stages of the change,individual adventure won’t reduce immediately. It maintains a level (about30%) as in the zero reference point. When the reference point moves into negative more than a certainvalue (about200), individual adventure reduces quickly.4. If using the view of dynamic reference point to investigate the value function,especially in the negative reference point, it should be confirm that previous losses haveoutnumber the limit or not. If previous losses have not outnumber the limit, the form ofthe value function will not change. If so, it will change.