Economics Dictionary of Arguments

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Gains and losses: In economics, "gain" refers to the benefit or profit derived from economic transactions or investments, often measured in terms of increased wealth, utility, or satisfaction. "Loss" indicates a reduction in economic value or utility, typically resulting from unfavorable business activities, market conditions, or inefficient resource allocation. These concepts are central to assessing financial performance and decision-making in economic activities. See also Decision-making processes.
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Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments.

 
Author Concept Summary/Quotes Sources

Richard O. Zerbe on Gain and Loss - Dictionary of Arguments

Parisi I 359
Gains and Losses/law/Zerbe: Law becomes relevant in determining the base for deciding what is a gain or a loss. Gains and losses are psychological states that are in part determined by law. Gains are normally defined from a position that recognizes legal rights; gains occur when a new right (or good) is obtained. Gains are measured by the WTP for them and costs, measured by the WTA, that is the compensation required to accept the loss. This is based on the assumption that law is the determinant of a psychological reference point from which one experiences a gain or loss. Where the right is divisible, such as in deciding how to divide a piece of property, it is BCA efficient for the right to go to the person to whom it would go if transactions costs were zero (Posner, 1972(1), p.18) That is, as long as person A has a WTP that exceeds person B’s WTA, the right would go to A and vice versa. In dividing a piece of land, then, some might go to A and some to B determined by their respective WTP and WTA. This would in general leave some of the land unclaimed, as neither individual’s WTP would exceed the other’s WTA. The allocation of this remainder would then be determined by auction—by the WTP, as any additional land would be a gain for either party, which gain is to be measured by the WTP.
>Willingness to pay/Tversky/Kahneman.

1. Posner, Richard (1972). “A Theory of Negligence.” Journal of Legal Studies 29.

Richard O. Zerbe. “Cost-Benefit Analysis in Legal Decision-making.” In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University.


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Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments
The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.
Zerbe, Richard O.
Parisi I
Francesco Parisi (Ed)
The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017


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