Loss Aversion and its impact on motivated Confirmation Bias in a human-specific perspective

Abstract

Cognitive biases are influencing humans and decision-making processes significantly. Therefore, this paper tries to point out the importance as well as the need for consideration. It provides a theoretical framework, how to measure quantitatively the cognitive biases loss aversion and confirmation bias of an individual human. Moreover, an experimental design, how to measure the relation between the two biases is presented.

First, theoretical background about the theory of choice and prospect theory is explained. Further, the biases loss aversion and confirmation bias are described, and possible explanations are presented. Within the practical implementation, possible ways, how to measure the individual loss aversion as well as the confirmation bias, and other methods coming along with it are presented. In addition, the author provides his own theory about how to measure the individual loss aversion. Closing the practical part, the author's hypotheses about the relationship between loss aversion and confirmation bias are discussed and possible results are presented. As this paper only provides the theoretical framework, further research and adjustments might be necessary, when implementing the study.

The practical implementation can also be used for further research in the areas of loss aversion and confirmation bias. Furthermore, it provides suggestions and ideas about biases, which are not defined yet but in high interest for the economic world.