Nav: Home

Global study confirms influential theory behind loss aversion

May 18, 2020

A new global study offers a powerful confirmation of one of the most influential frameworks in all of the behavioral sciences and behavioral economics: prospect theory, which when introduced in 1979 led to a sea change in understanding the irrational and paradoxical ways individuals make decisions and interpret risk with major impacts for science, policy, and industry. Led by a Columbia University Mailman School of Public Health researcher, the new study in 19 countries and 13 languages replicates the original study that provided the empirical basis for prospect theory. Results appear in Nature Human Behaviour.

Developed by Nobel Prize winner Daniel Kahneman and Amos Tversky, prospect theory has been called the most influential theoretical framework in all of the social sciences and popularized the concept of loss aversion, which says that people prefer small guaranteed outcomes over larger risky outcomes. The 1979 paper that launched the theory is today the most cited paper in economics and is among the most cited in psychological science.

The new study led by Kai Ruggeri, PhD, assistant professor of health policy and management, is a robust test of prospect theory at a scale commensurate with its impact--and the first to test the theory in so many countries, languages, currencies, and to focus on the generalizability of the theory. Ruggeri and colleagues used nearly identical methods to those in the original study, modifying them only to make currency values relevant for a 2019 sample within each country. Participants were presented with 17 hypothetical decisions about potential gains and losses of money. For example: If you were given $1,000 to play a game, would you accept a 50 percent chance to double your money or a 100 percent guarantee of gaining an additional $500? In all, 4,098 respondents who completed all the questions were included in the final analysis.

Results of 1979 study--now confirmed in the new global study--gave rise to prospect theory and upended orthodoxies around rational choices. Among the original study's findings: people tend to be risk-seeking when maximizing gains, but risk-averse when minimizing losses; our preferences may change depending on how they are rendered sequentially; and we tend to overweight small probabilities.

The researchers found that Kahneman and Tversky's 1979 empirical foundation for proposing prospect theory broadly replicates in all the countries they studied: they report a 90 percent replication in areas directly testing the theoretical contrasts at the heart of prospect theory. Some effects were less strong than in 1979, but the researchers say this outcome may be more a testament to the ease of accessing participants in 2019, rather than suggesting a flaw in the original study conclusions. Another possible explanation--a third of respondents were aware of the concept of loss aversion--was shown to have only a weak effect on their decisions.

The implications of prospect theory have been far-reaching, extending from economics to behavioral psychology, including health behaviors. Prospect theory has helped explain why people under-use preventive care in health, how people misunderstand risk in health, and how to frame behavioral interventions for smoking cessation in terms of losses instead of gains, among many other health-related insights.

"Our study offers compelling evidence for continuing to consider prospect theory as a viable explanation of individual behavior, and therefore valuable for informing public policy around the world, in areas from financial decision-making to population well-being," says Ruggeri.

Peggah Khorrami, MPH '20, was a unique contributor and coauthor of the study. She was the first Columbia student to participate in the Junior Researcher Programme, a global initiative for early career researchers in the behavioral sciences which is now partnering with Columbia Global Programs. Junior Researcher Programme, members were a driving force for the study. For a complete list of all 32 study authors from 27 institutions, refer to the study on Nature Human Behaviour.
-end-


Columbia University's Mailman School of Public Health

Related Health Articles:

Modifiable health risks linked to more than $730 billion in US health care costs
Modifiable health risks, such as obesity, high blood pressure, and smoking, were linked to over $730 billion in health care spending in the US in 2016, according to a study published in The Lancet Public Health.
New measure of social determinants of health may improve cardiovascular health assessment
The authors of this study developed a single risk score derived from multiple social determinants of health that predicts county-level cardiovascular disease mortality.
BU study: High deductible health plans are widening racial health gaps
The growing Black Lives Matter movement has brought more attention to the myriad structures that reinforce racial inequities, in everything from policing to hiring to maternal mortality.
Electronic health information exchange improves public health disease reporting
Disease tracking is an important area of focus for health departments in the midst of the COVID-19 pandemic.
E-health resource improves men's health behaviours with or without fitness facilities
Men who regularly used a free web resource made significantly more health changes than men who did not, finds a new study from the University of British Columbia and Intensions Consulting.
Mental health outcomes among health care workers during COVID-19 pandemic in Italy
Symptoms of posttraumatic stress disorder, depression, anxiety and insomnia among health care workers in Italy during the COVID-19 pandemic are reported in this observational study.
Mental health of health care workers in china in hospitals with patients with COVID-19
This survey study of almost 1,300 health care workers in China at 34 hospitals equipped with fever clinics or wards for patients with COVID-19 reports on their mental health outcomes, including symptoms of depression, anxiety, insomnia and distress.
Health records pin broad set of health risks on genetic premutation
Researchers from the University of Wisconsin-Madison and Marshfield Clinic have found that there may be a much broader health risk to carriers of the FMR1 premutation, with potentially dozens of clinical conditions that can be ascribed directly to carrying it.
Attitudes about health affect how older adults engage with negative health news
To get older adults to pay attention to important health information, preface it with the good news about their health.
Geographic and health system correlates of interprofessional oral health practice
In the current issue of Family Medicine and Community Health (Volume 6, Number 2, 2018, pp.
More Health News and Health Current Events

Trending Science News

Current Coronavirus (COVID-19) News

Top Science Podcasts

We have hand picked the top science podcasts of 2020.
Now Playing: TED Radio Hour

Listen Again: The Power Of Spaces
How do spaces shape the human experience? In what ways do our rooms, homes, and buildings give us meaning and purpose? This hour, TED speakers explore the power of the spaces we make and inhabit. Guests include architect Michael Murphy, musician David Byrne, artist Es Devlin, and architect Siamak Hariri.
Now Playing: Science for the People

#576 Science Communication in Creative Places
When you think of science communication, you might think of TED talks or museum talks or video talks, or... people giving lectures. It's a lot of people talking. But there's more to sci comm than that. This week host Bethany Brookshire talks to three people who have looked at science communication in places you might not expect it. We'll speak with Mauna Dasari, a graduate student at Notre Dame, about making mammals into a March Madness match. We'll talk with Sarah Garner, director of the Pathologists Assistant Program at Tulane University School of Medicine, who takes pathology instruction out of...
Now Playing: Radiolab

What If?
There's plenty of speculation about what Donald Trump might do in the wake of the election. Would he dispute the results if he loses? Would he simply refuse to leave office, or even try to use the military to maintain control? Last summer, Rosa Brooks got together a team of experts and political operatives from both sides of the aisle to ask a slightly different question. Rather than arguing about whether he'd do those things, they dug into what exactly would happen if he did. Part war game part choose your own adventure, Rosa's Transition Integrity Project doesn't give us any predictions, and it isn't a referendum on Trump. Instead, it's a deeply illuminating stress test on our laws, our institutions, and on the commitment to democracy written into the constitution. This episode was reported by Bethel Habte, with help from Tracie Hunte, and produced by Bethel Habte. Jeremy Bloom provided original music. Support Radiolab by becoming a member today at Radiolab.org/donate.     You can read The Transition Integrity Project's report here.