Loss Aversion

Marie Briguglio, Charity-Joy Acchiardo, Dirk Mateer, and Wayne Geerling published a series of teaching guides for clips that can be used to teach topics in behavioral economics. Their paper, Behavioral economics in film: Insights for educators, is a great resource for educators interested in using media to teach. The following teaching guide has been modified from their publication. The main take away from using this clip is for students to understand what loss aversion means and how potential gains and losses are treated asymmetrically. 

As a warm-up activity ask students to write down answers to the following questions:

  • When was the last time you participated in something that could result in a win or a loss?

  • How did you feel about either prospect?

Have students share their responses with their neighbors and compare their results. If time allows, have a student share their response. Introduce the term "loss aversion" to students and then play the following scene from Moneyball:

After the clip, have students answer the following questions. This can be done as a think-pair-share activity or shared in a more casual class discussion:

  1. Why do you think the manager in the clip, Billy Beane, was more upset about losing games than he was excited about winning the games?

  2. How does loss aversion differ from risk aversion?

It's important to distinguish between loss aver and risk aversion. Risk aversion refers to the avoidance of uncertainty of outcomes while loss aversion is a behavioral response to winning and losing (regardless of the certainty of those outcomes. More generally, loss aversion is captured by the expression: “losses loom larger than gains.” Loss aversion has been used to explain the endowment effect, sunk cost fallacy, and the status quo bias.

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