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Preference Reversals of Comparative Affective Judgments in the Prospect Theoretic Value

Function
Sumitava Mukherjee, PhD, Ahmedabad University, India and Narayanan Srinivasan, PhD, University of
Allahabad, India
Supporting Summary:

According to the value function of Prospect Theory, affective value of a loss is larger than a gain. We have
recently shown that for affective judgments concerning prospective gains and losses, people estimate gains
to loom equally large to losses for small amounts while losses loom larger than gains for high amounts
(Mukherjee et al., 2017). One question that was not addressed in our earlier study is whether there are
inflexion points for an individual when one compares gains and losses across a range of magnitude from
small to medium. The presence of such an inflexion point would suggest a revised value function in prospect
theory to accommodate this data. Further, in the previous studies, response formats were unipolar 5-point
scales or 3-point comparative rating scales, which resulted in many participants reporting no differences
between gains and losses, especially for low amounts. In the current study, we asked participants to imagine
playing a game where in each round they could either win or lose some pre-fixed amounts, ranging from 5
INR to 500 INR. 5 INR was a low amount both in an absolute sense and also relatively compared to all other
amounts used (5, 10, 25, 50, 75, 100, 250, 500). Participants were asked to judge whether gains would have
more effect on their feelings/emotions compared to losses or vice-versa. The response scale was a two-
alternative forced choice between gain>loss and loss>gain, so that we could find a clearer preference for
both low and high amounts. The study was run using two orders of magnitude presentation: a random order
and a uniform ascending order of amounts. We found that on average, across all participants, contrary to the
prediction of prospect theory, gains loomed larger than losses for low amounts and losses loomed larger for
higher amounts. Further, interestingly, analyzing individual data showed a pattern of preference reversal. A
few subjects showed a consistent preference of either being gain-seeking or loss averse across all amounts.
However, most other participants moved from being gain seeking (judging gains > losses) to loss averse
(judging losses > gains) after a threshold point, which seemed to vary across individual subjects. This pattern
was more pronounced when the magnitudes were presented in a uniformly ascending order. This is one of
the first empirical evidences of preference reversal in the value function for prospective affective judgments
about gains and losses. A modified value function is needed to explain these findings where there is a point
of inflexion and the function is magnitude dependent. Our current results have significant implications for
theories of decision making and applications of those theories in practical applications. Mukherjee, S., Sahay,
A., Pammi, V.S.C., & Srinivasan, N. (2017). Is Loss-aversion magnitude dependent? Measuring prospective
affective judgments regarding gains and losses. Judgment and Decision Making, 12(1), 81-89.

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Submission Proof 01/02/17 11:50 pm

Title:
Preference Reversals of Comparative Affective Judgments in the Prospect Theoretic Value Function
Submitter's E-mail Address:
sumitava.inbox@gmail.com
Poster Type:
Standard Poster
Abstract:
More participants judged gains to be more affective than losses for low amounts and the effect reversed after
crossing a monetary threshold. This preference reversal from gain seeking to loss aversion as a function of
magnitude implies that loss aversion is dynamic and not absolute contradicting Prospect Theory.
Applying to NIDCR "Building Bridges" Travel Award:
No
Are you a Graduate or Undergraduate Student?:
No
Primary Subject Area:
Cognitive
Secondary Subject Area:
General
Keyword:
Judgment and Decision Making

First Presenting Author

Presenting Author

Sumitava Mukherjee, PhD

Email: sumitava.inbox@gmail.com

Membership Number: 84958

Ahmedabad University

India

Second Author

Narayanan Srinivasan, PhD

Email: nsrini@cbcs.ac.in

University of Allahabad

India

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Submission Proof 01/02/17 11:50 pm

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