Scholten, Marc, Read, Daniel and Stewart, Neil (2019) The framing of nothing and the psychology of choice. Journal of Risk and Uncertainty, 59 (2). pp. 125-149. doi:10.1007/s11166-019-09313-5

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Abstract

Zero outcomes are inconsequential in most models of choice. However, when disclosing zero outcomes they must be designated. It has been shown that a gamble is judged to be more attractive when its zero outcome is designated as “losing $0” rather than “winning $0,” an instance of what we refer to as the mutable-zero effect. Drawing on norm theory, we argue that “losing $0” or “paying $0” evokes counterfactual losses, with which the zero outcome compares favorably (a good zero), and thus acquires positive value, whereas “winning $0” or “receiving $0” evokes counterfactual gains, with which the zero outcome compares unfavorably (a bad zero), and thus acquires negative value. Moreover, we propose that the acquired value of zero outcomes operates just as the intrinsic value of nonzero outcomes in the course of decision making. We derive testable implications from prospect theory for mutable-zero effects in risky choice, and from the double-entry mental accounting model for mutable-zero effects in intertemporal choice. The testable implications are consistently confirmed. We conclude that prevalent theories of choice can explain how decisions are influenced by mutable zeroes, on the shared understanding that nothing can have value, just like everything else.

Item Type:	Journal Article
Subjects:	B Philosophy. Psychology. Religion > BC Logic B Philosophy. Psychology. Religion > BF Psychology H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
Divisions:	Faculty of Social Sciences > Warwick Business School > Behavioural Science Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH):	Counterfactuals (Logic), Choice (Psychology), Risk assessment
Journal or Publication Title:	Journal of Risk and Uncertainty
Publisher:	Springer New York LLC
ISSN:	0895-5646
Official Date:	October 2019
Dates:	Date Event October 2019 Published 3 December 2019 Available 20 December 2018 Accepted
Date of first compliant deposit:	16 October 2019
Volume:	59
Number:	2
Page Range:	pp. 125-149
DOI:	10.1007/s11166-019-09313-5
Status:	Peer Reviewed
Publication Status:	Published
Publisher Statement:	This is a post-peer-review, pre-copyedit version of an article published in Journal of Risk and Uncertainty. The final authenticated version is available online at: http://dx.doi.org/10.1007/s11166-019-09313-5
Access rights to Published version:	Open Access
RIOXX Funder/Project Grant:	Project/Grant ID RIOXX Funder Name Funder ID PTDC/ MHC-PCN/3805/2012 Fundação para a Ciência e a Tecnologia https://viaf.org/viaf/148753396/#Fundação_para_a_Ciência_e_a_tecnologia ES/K002201/1 [ESRC] Economic and Social Research Council http://dx.doi.org/10.13039/501100000269 RP2012-V-022 Leverhulme Trust http://dx.doi.org/10.13039/501100000275
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