Asymmetric Perception of Gains versus Non‐losses and Losses versus Non‐gains: The Causal Role of Regulatory Focus

Recent studies show that, while losses loom larger than equivalent non‐gains, gains loom larger than equivalent non‐losses. This finding has been interpreted within the framework of regulatory focus theory. In this study, we highlight the importance of considering the motivational focus independently of the framing and the valence of outcome, thus exploring the causal effect of regulatory focus on the asymmetric perception of gains versus non‐losses and losses versus non‐gains. In two studies, we examine the perceived effects of either actual or hypothetical changes in monetary wealth, while orthogonally manipulating framing, valence, and regulatory focus. We find a significant interaction between the three factors. The gain versus non‐loss asymmetry in perceived satisfaction is stronger in promotion focus, whereas the loss versus non‐gain asymmetry in perceived dissatisfaction is stronger in prevention focus. The results suggest that the effects of incentives framed in terms of (non)gains and (non)losses depend on their congruence with the individual's motivational state. Copyright © 2013 John Wiley & Sons, Ltd.     

The evolution of decision-making under risk: Framing effects in monkey risk preferences

When making choices between risky options, human decision-makers exhibit a number of framing effects. One of the most prominent framing effects is the tendency for decision makers to evaluate gambles relative to a reference point, and to act risk-seeking when prospects are framed as losses but risk-averse when identical prospects are framed as gains. This tendency for risk-preferences to reverse between loss and gain frames has been termed the reflection effect, and is one of the primary predictions of Prospect Theory. Here, we explore whether non-human primates exhibit a similar reflection effect. Using a token-trading task, we show that capuchin monkeys (Cebus apella) exhibit an analogous reversal of risk preferences depending on whether outcomes are presented as gains or losses, suggesting that similar framing effects also influence choice in non-human primates. This finding suggests that the mechanisms that drive framing effects in humans may be evolutionarily ancient, extending broadly across the primate order.     

Applying prospect theory to pilot weather-related decision-making: The impact of monetary and time considerations on risk taking behaviour

One of the key findings of prospect theory is that people tend to treat potential gains differently to potential losses. Consistent with earlier findings across a range of areas, pilots were risk averse when faced with an uncertain situation involving monetary gains and risk seeking when faced with a monetary loss. Prospect theory has largely been used to explore monetary decision-making; however, “time” is potentially a more important consideration for pilots than money. For example, how much time can be flown with the current fuel onboard. It was found that pilots' decision behaviour changed when faced with a decision involving time, with pilots risk averse for both a time gain and a time loss situation. Pilots appeared to prefer to know precisely the time required for a journey, rather than take a gamble on a potential short cut. Evidence also suggests pilots were more likely to take risks in situations that they perceive they have more control over (e.g. air traffic delays) compared to dynamic weather-related events. There was some evidence to suggest pilots do not consider a decision in terms of an end state, but rather in terms of losses and gains from their current state. The final part of the study found evidence that it may be possible to predict pilot risk taking behaviour using self-report decision frames.     

Delay discounting of monetary gains and losses in adolescents with ADHD: Contribution of delay aversion to choice

Adolescents with attention-deficit/hyperactivity disorder (ADHD) are known to have stronger preferences for smaller immediate rewards over larger delayed rewards in delay discounting tasks than their peers, which has been argued to reflect delay aversion. Here, participants performed a delay discounting task with gains and losses. In this latter condition, participants were asked whether they were willing to wait in order to lose less money. Following the core assumption of the delay aversion model that individuals with ADHD have a general aversion to delay, one would predict adolescents with ADHD to avoid waiting in both conditions. Adolescents (12–17 years) with ADHD (n = 29) and controls (n = 28) made choices between smaller immediate and larger delayed gains, and between larger immediate and smaller delayed losses. All delays (5–25 s) and gains/losses (2–10 cents) were experienced. In addition to an area under the curve approach, a mixed-model analysis was conducted to disentangle the contributions of delay duration and immediate gain/delayed loss amount to choice. The ADHD group chose the immediate option more often than controls in the gain condition, but not in the loss condition. The contribution of delay duration to immediate choices was stronger for the ADHD group than the control group in the gain condition only. In addition, the ADHD group scored higher on self-reported delay aversion, and delay aversion was associated with delay sensitivity in the gain condition, but not in the loss condition. In sum, we found no clear evidence for a general aversion to delay in adolescents with ADHD.     

From gains to losses: Age-related differences in decisions under risk in a non-monetary gambling task

Lifespan theory suggests a shift from a primary orientation towards attaining gains in young adulthood to preventing losses in older adulthood. The current research tested if this motivational shift is reflected in behavioural and emotional responses to risks in non-monetary gains and losses. Study 1 established in a sample of N = 168 younger (18–30 years) and older adults (65–79 years) that a non-monetary gambling task was experienced similarly by the age groups with respect to arousal and valence of the task, and the willingness to continue playing. In Study 2 (N = 83), differences between young (18–30 years) and older (64–85 years) adults’ risk-taking in this non-monetary gambling task with mixed gambles were tested while assessing physiological responses (event-related heart rate change) to gain and loss feedback. Behavioural – but not physiological – results confirm hypotheses derived from a lifespan motivational framework regarding age-differential effects of gains and losses.     

Loss aversion in the eye and in the heart: The autonomic nervous system's responses to losses

The common view in psychology and neuroscience is that losses loom larger than gains, leading to a negativity bias in behavioral responses and Autonomic Nervous System (ANS) activation. However, evidence has accumulated that in decisions under risk and uncertainty individuals often impart similar weights to negative and positive outcomes. We examine the role of the ANS in decisions under uncertainty, and its consistency with the behavioral responses. In three studies, we show that losses lead to heightened autonomic responses, compared to equivalent gains (as indicated by pupil dilation and increased heart rate) even in situations where the average decision maker exhibits no loss aversion. Moreover, in the studied tasks autonomic responses were not associated with risk taking propensities. These results are interpreted by the hypothesis that losses signal the subjective importance of global outcome patterns. Copyright © 2010 John Wiley & Sons, Ltd.     

Self‐Control Moderates Decision‐Making Behavior When Minimizing Losses versus Maximizing Gains

We examined (1) whether people would be more responsive to the delayed consequences of their decisions when attempting to minimize losses than when attempting to maximize gains in a history‐dependent decision‐making task and (2) how trait self‐control would moderate such an effect. In two experiments, participants performed a dynamic decision‐making task where they chose one of two options on each trial. The increasing option always gave a smaller immediate reward but caused future rewards for both options to increase. The decreasing option always gave a larger immediate reward but caused future rewards for both options to decrease. In Experiment 1 where the two options had equivalent expected value in the long run, participants were more prone to select the increasing option, which yielded larger benefits on future trials, in the loss‐minimization condition than in the gain‐maximization condition. Trait self‐control moderated the effect of losses by enhancing the effect for low self‐control participants while attenuating it for high self‐control participants. In Experiment 2 where selecting the increasing option was suboptimal, low self‐control participants still attempted to reduce losses on future trials by selecting the increasing option more often than high self‐control participants. These results suggest that decision makers value delayed consequences of their actions more in a losses domain relative to a gains domain and low self‐control individuals are more susceptible to such an effect. Copyright © 2014 John Wiley & Sons, Ltd.     

Reversal of the preference reversal phenomenon

The widely replicated preference reversal phenomenon (PRP) violates most theories of decision under risk. People exhibiting PRP choose a safe bet (with a large chance of a small gain) over a long shot (with a small chance of a larger gain). But, when bidding to buy or sell each bet, they bid more for the long shot. Surprisingly, in Experiment 1, a new opposite reversal pattern (NPRP) was found: Safe bets typically received larger bids than long shots and reversals were far more frequent when the long shot was chosen. In Experiment 2, NPRP was found for $100 expected value bets, but PRP occurred for bets with $3 expected values. The task characteristics apparently necessary to produce NPRP are (1) bids in the form of maximum buying prices, (2) possibility of loss in bidding, but not in choice, and (3) large payoffs. It is argued that wealth effects predicted by expected utility theory are too small to explain NPRP. Instead, it is hypothesized that a contingent decision process underlies the shift in reveral patterns and that aspiration levels exert increased influence in bidding to buy when payoffs are large.     

Buyers Versus Sellers: How They Differ in Their Responses to Framed Outcomes

Consumers’ reactions to a difference in price can depend on how it is framed. If buyers interpret paying $60 rather than $65 as getting a $5 discount, then they are likely to consider paying $60 to be a gain and paying $65 to be a nongain. Alternatively, if they interpret having to pay $65 rather than $60 as incurring a $5 penalty, then they may consider paying $60 to be a nonloss and paying $65 to be a loss. Similarly, sellers can also experience gains, nongains, nonlosses, and losses. This article suggests that buyers are prevention focused and consequently place a greater emphasis on loss‐related frames, whereas sellers are promotion focused and place a greater emphasis on gain‐related frames. Therefore, for equivalent positive outcomes, buyers feel better about nonlosses, but sellers feel better about gains. For equivalent negative outcomes, buyers feel worse about losses, but sellers feel worse about nongains. These effects, however, disappear when there is little motivation to process information about the monetary transaction.     

Academic decision making and prospect theory

Two studies are reported that investigate the applicability of prospect theory to college students' academic decision making. Exp. 1 failed to provide support for the risk-seeking portion of the fourfold pattern predicted by prospect theory but did find the greater weighting of losses over gains. Using a more sensitive dependent measure, in Exp. 2 the results of the first experiment were replicated in terms of the gain-loss effect and also found some support for the fourfold pattern in the interaction between probabilities and gain versus loss. The greatest risk-seeking was found in the high probability loss condition.     

Trajectory of risky decision making for potential gains and losses from ages 5 to 85

The ability to make advantageous decisions in the face of uncertainty is an essential human skill, yet the development of such abilities over the lifespan is still not well understood. In the current study, from childhood through older adulthood, we tracked the developmental trajectory of risk taking for gains and losses, and expected value (EV) sensitivity in risky choices. In the gain domain, risk‐taking decreased consistently across the lifespan. In the loss domain, risk‐taking was relatively constant across ages, a result we attribute to the pervasiveness of loss aversion. EV sensitivity showed an inverted‐U‐shaped function, increasing from childhood to adulthood but then decreasing for the elderly, which occurred for both risky gains and risky losses. This finding is consistent with neuropsychological and neuroanatomical evidence concerning the role of the frontal lobe in decision making, which is relatively late to develop during childhood but may degrade earlier in the later years. Copyright © 2010 John Wiley & Sons, Ltd.     

Better Safe than Sorry: Risking Irresponsibility by Seeking Uncertainty

Research findings differ as to whether choosing a risky option is an efficient strategy for decision makers seeking to avoid responsibility for potential failures. A risky choice may leave the final outcome to chance factors, but the decision maker can still be held responsible for choosing risk. Further, it is unclear whether a risky choice is a responsible choice. The present article investigates the putative relationship between risk‐taking and responsibility by drawing a distinction between being responsible for the outcome (R1) versus acting responsibly (R2). Four experiments were performed, in which participants were presented with scenarios describing decision makers facing a choice between a risky (uncertain) option and a riskless (certain) option, framed in terms of losses or equivalent gains. The results showed that decision makers who chose the risky alternative were judged to have acted in a less responsible manner (R2), while still being held equally responsible for the outcome (R1), unless they were ignorant of the risks involved. Choosing risk did not absolve decision makers from blame, despite being less causal and less in control than those who chose the riskless option. Risky decision makers were also judged to be more personally involved. The dissociation between R1 and R2 ratings confirms earlier findings and serves to clarify an alleged relationship between risky choices and responsibility aversion. Framing effects for own choices were found in both scenarios. In contrast, responsibility ratings were only slightly affected by frame. Copyright © 2017 John Wiley & Sons, Ltd.     

Good or Bad,We Want it Now: Fixed‐cost Present Bias for Gains and Losses Explains Magnitude Asymmetries in Intertemporal Choice

Intertemporal tradeoffs are ubiquitous in decision making, yet preferences for current versus future losses are rarely explored in empirical research. Whereas rational‐economic theory posits that neither outcome sign (gains vs. losses) nor outcome magnitude (small vs. large) should affect delay discount rates, both do, and moreover, they interact: in three studies, we show that whereas large gains are discounted less than small gains, large losses are discounted more than small losses. This interaction can be understood through a reconceptualization of fixed‐cost present bias, which has traditionally described a psychological preference for immediate rewards. First, our results establish present bias for losses—a psychological preference to have losses over with now. Present bias thus predicts increased discounting of future gains but decreased (or even negative) discounting of future losses. Second, because present bias preferences do not scale with the magnitude of possible gains or losses, they play a larger role, relative to other motivations for discounting, for small magnitude intertemporal decisions than for large magnitude intertemporal decisions. Present bias thus predicts less discounting of large gains than small gains but more discounting of large losses than small losses. The present research is the first to demonstrate that the effect of outcome magnitude on discount rates may be opposite for gains and losses and also the first to offer a theory (an extension of present bias) and process data to explain this interaction. The results suggest that policy efforts to encourage future‐oriented choices should frame outcomes as large gains or small losses. Copyright © 2012 John Wiley & Sons, Ltd.     

Do Measures of Executive Functioning and Manipulation of Ego Depletion Predict How University Students Discount Probabilistic Gains and Losses?

Discounting occurs when the subjective value of an outcome is altered because the outcome is delayed or uncertain. Previous research has suggested that how individuals discount delayed gains is related to executive functioning. The present study attempted to extend this relationship to discounting of probabilistic gains and losses, and to examine whether diminishing cognitive resources would impact how participants discounted monetary outcomes. In Experiment 1, university students completed an executive function measure and then a probability-discounting task that involved the hypothetical sum of either $1,000 or $100,000 framed as either a gain or a loss. The executive function of organization was a significant predictor of how participants discounted all four outcomes while motivational drive predicted discounting of losses, but not gains. In Experiment 2, participants completed the same measures with the addition of an ego-depletion task to deplete cognitive resources before making discounting decisions. The executive function of motivational drive and empathy were significant predictors of how participants discounted both loss outcomes. The results suggest that discounting of monetary outcomes is related to the executive function of organization for gains and motivational drive, and empathy for losses. They also support the notion that the discounting of gains may be a distinct process from the discounting of losses.     

Effects of Goat Framing in Job Advertisements on Organizational Attractiveness1

Two experiments were conducted to investigate the effects of goal framing in job advertisements on organizational attractiveness. Job ads were created that emphasized the potential costs or losses of not applying (i.e., loss frame) or the potential gains or benefits of applying (i.e., gain frame). The first experiment (N= 70) found that participants were more attracted to the company in the gain‐framed ad than in the loss‐framed ad. The second experiment (N= 100) attempted to determine the reason for the greater attractiveness of the gain‐framed ad compared to the loss‐framed ad. Two possible explanations— valence‐based encoding and regulatory focus—were examined. Results suggest that both valence‐based encoding and regulatory focus mediated the relationship between framing and organizational attractiveness.     

The construction of risk in relationships: The role of framing in decisions about intimate relationships

Two studies examined the applicability of Kahneman and Tversky's (1979) notion of “framing” to decision making in romantic relationships. Using scenarios about hypothetical relationships, the results of Study 1 demonstrated that framing objectively identical alternatives in terms of losses versus gains affected participants' preferences for risky versus cautious actions. Furthermore, adult attachment style was found to moderate the impact of this framing effect. Study 2 examined individual differences in people's spontaneous tendencies to frame their feelings about their actual relationships in terms of losses or gains. Consistent with the findings of Study 1, attachment style was reliably associated with spontaneous framing. Secure individuals were most likely to represent their feelings in terms of a “gains frame” whereas fearful individuals were most likely to represent their feelings in terms of a “loss frame.”     

Show me the Money: The impact of actual rewards and losses on the feedback negativity

The feedback negativity (FN) is an event-related potential component which is typically conceptualized as a negativity in response to losses that is absent in response to gains. However, there is also evidence that variation in the FN reflects the neural response to gains. The present study sought to explore these possibilities by manipulating the context in which loss and gain feedback was presented in a straightforward gambling task. In half the blocks, participants could win or lose money (Value condition), and in half the blocks, participants could not win or lose any money (No Value condition). The degree to which losses and gains were differentiated from one another (i.e., the ΔFN) was greater in the Value condition than in the No Value condition. Furthermore, though the responses to loss feedback and gain feedback were each enhanced in the Value condition relative to the No-Value condition, the effect of the monetary manipulation was substantially larger for the positivity to gains than the negativity to losses. This is consistent with the notion that the FN might reflect two independent processes, but that variation in the FN depends more upon the response to rewards than losses.     

Reference point adaptation: Tests in the domain of security trading

According to prospect theory [Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk, Econometrica, 47, 263–292], gains and losses are measured from a reference point. We attempted to ascertain to what extent the reference point shifts following gains or losses. In questionnaire studies, we asked subjects what stock price today will generate the same utility as a previous change in a stock price. From participants’ responses, we calculated the magnitude of reference point adaptation, which was significantly greater following a gain than following a loss of equivalent size. We also found the asymmetric adaptation of gains and losses persisted when a stock was included within a portfolio rather than being considered individually. In studies using financial incentives within the BDM procedure [Becker, G. M., DeGroot, M. H., & Marschak, J. (1964). Measuring utility by a single-response sequential method. Behavioral Science, 9(3), 226–232], we again noted faster adaptation of the reference point to gains than losses. We related our findings to several aspects of asset pricing and investor behavior.     

The effect of salience on mental accounting: how integration versus segregation of payment influences purchase decisions

Although mental accounting principles are generally robust, the integration‐of‐losses principle often fails. This research argues that when information salience is high, people actively segregate. To demonstrate that effect, this research uses purchase decision making for which the total payment is a key decision factor and compares examples such as the following equivalent total payments: “$120.95 for a stroller plus $19.95 for shipping” (i.e., segregation) versus “$140.90 for a stroller including shipping” (i.e., integration). Two studies demonstrate that integration increases purchase intentions when the salience of the smaller payment is higher. Specifically, integration leads to higher purchase intentions than does segregation when (1) the surcharge is visually more salient, (2) the surcharge is easy to process, and (3) price perceptions are stimulus instead of recall driven. Therefore, this research extends mental accounting by identifying conditions in which the integration‐of‐losses principle is likely to prevail. Copyright © 2006 John Wiley & Sons, Ltd.