Decomposing Loss Aversion from Gaze Allocation and Pupil Dilation

Abstract

Loss-averse decisions, in which one avoids losses at the expense of gains, are highly prevalent. However, the underlying mechanisms remain controversial. The prevailing account highlights a valuation bias that overweighs losses relative to gains, but an alternative view stresses a response bias to avoid choices involving potential losses. Here we couple a computational process model with eye-tracking and pupillometry to develop a physiologicallygrounded framework for the decision process leading to accepting or rejecting gambles with equal odds of winning and losing money. Overall, loss-averse decisions were accompanied by preferential gaze towards losses and increased pupil dilation for accepting gambles. Using our model, we found gaze allocation selectively indexed valuation bias, and pupil dilation selectively indexed response bias. Finally, we demonstrated that our computational model and physiological biomarkers can identify distinct types of loss-averse decision-makers who would otherwise be indistinguishable using conventional approaches. Our study provides an integrative framework for the cognitive processes that drive loss-averse decisions and highlights the biological heterogeneity of loss aversion across individuals. Significance StatementWe revisit the concept of loss aversion by synthesizing distinct views into an integrative framework and by probing physiological biomarkers associated with the behavior. The framework decomposes loss aversion into a valuation bias, which weighs losses over gains, and a response bias, which avoids loss-related choices altogether. Further, we revealed a double dissociation in physiology underlying the decision process. Valuation bias was associated with preferential gaze allocation to losses whereas response bias was associated with pupillary dilation. Our framework exposed biological heterogeneity underlying loss aversion and distinguishes different loss-averse decision makers who are otherwise indistinguishable using conventional approaches. Our integrative approach provides a deeper analysis of the mechanisms underlying loss aversion and incorporates distinct views within a unified biological framework.