our tendency to feel sadder about losing, say, $1,000 than feeling happy about gaining that same amount
But this sounds like diminishing marginal utility to me. I mean, the $1,000 dollars I’m losing provides me with a greater level of satisfaction than an addition $1,000 would provide me with.
My feeling was that loss aversion was a situation where my satisfaction would be lower in a situation where I lost $10,000 and ended up with $40,000 than it would be in a situation where I gained $10,000 and ended up with $40,000 – even though in both situations my endowment was the same.
I thought loss aversion was about an additional payoff relevant factor (namely that the direction of the change in my outcomes is also payoff relevant, as well as the strict outcomes) not an arbitrary way of framing diminishing marginal utility.
If someone could explain where I am making a mistake it would be much appreciated 🙂