Values of Gains and Losses: Reference States and Choice of Measure

The available empirical evidence continues to suggest that people commonly value losses more, and often much more, than otherwise commensurate gains. Consequently, current practice of using the WTP measure for all changes is often likely to lead to misleading assessments of welfare changes. The reference dependence of preferences implies instead that while the WTP measure is appropriate for gains, the value of both positive and negative changes in the domain of losses will usually be more accurately assessed with the WTA measure.