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a b s t r a c tIn this research, we offer the hypothesis that time pressure reverses risk preferences. That is, people are typically risk-averse over gains and risk-seeking over losses, as predicted by prospect theory, but we propose that people under time pressure are risk-seeking over gains and risk-averse over losses. This is because people under time pressure perceive the maximal possible outcome -that is, the best possible gain over gains and the worst possible loss over losses -to be more likely to occur, such that they use it as their reference point and not the status quo to evaluate all other outcomes. As such, they perceive intermediary gains relative to the best possible gain as relative losses, which results in risk-seeking, and they perceive intermediary losses relative to the worst possible loss as relative gains, which results in risk-aversion. We conclude by situating our research among prior work generally and with prospect theory specifically.

The endowment effect is based on the loss aversion built into Prospect Theory's asymmetric value function. This paper posits that the level of consumer involvement with a decision is a moderator of the endowment effect. It is proposed that high involvement increases the slope differential between the loss and gain regions of the value function, enhancing loss aversion. The research further posits that higher involvement is accompanied by higher arousal and cognitive processing which produces stronger negativity in thoughts. The argument for these effects is discussed in the context of evolutionary theory. We conclude that consumers are more loss averse in high versus low involvement conditions.

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