Abstract: Loss aversion, which means that negative changes (losses) loom larger than equivalent positive changes (gains), is one of the basic elements of Prospect Theory. The general accepted interpretation for lose aversion is that the outcome of choice can be regarded as gains or losses compared with different reference points, and that losses have greater impact on preference than gains. In the present research, we hypothesized that the loss aversion was due to the uneven routes of gains and losses, where “route” was defined as the number of transitions of the same possession. In conventional scenarios, the gains were usually one-route with the one transition from not having a possession to having it, whereas the losses were typically two-route, with the another transition from having to not having it. As a result, the reason why lose aversion can be detected in these scenarios is because the number of routes for losses is greater than that for gains, and that the greater number of routes brings stronger psychological feelings.
To test our hypothesis, several scenarios were developed which differed from the traditional one of “one-route gains vs. two-route losses”. A total of 355 undergraduate or graduate students were recruited and paid for participation. In Study 1, “one-route gains vs. one-route losses”, “two-route gains vs. one-route losses” and “one-route gains vs. three-route gains” scenarios were designed and posed to participants. The possible loss aversion was measured by the participants’ willingness to accept symmetric fair bets and the ratio of loss to gain. In Study 2, the psychological feeling was measured by using unmarked lines and hand dynamometer to examine whether psychological feeling varied with the number of routes of losses and gains.
The results revealed that: (1) the loss aversion effect was not robust enough to survive in a context where the asymmetry pattern of “one-route gain vs. two-route loss” was changed or reversed, and (2) the more routes of gains and losses were imposed, the stronger psychological feelings will be experienced. The present data pit route-based account against the reference point account and demonstrate that the mechanism of route may provide a more promising explanation for the observed changes in loss aversion. The implications of these findings for tax policy-making and social reform were discussed.

Key words: loss aversion, reference point, routes, psychological feeling