Publications
Publications
- 2008
- HBS Working Paper Series
Variance-Seeking for Positive (and Variance-Aversion for Negative) Experiences: Risk-Seeking in the Domain of Gains?
By: Jolie Mae Martin, Gregory M. Barron and Michael I. Norton
Abstract
In contrast to research which has conflated losses with negative experiences and gains with positive experiences, we argue that because reference points are set by memories of extremely good and bad experiences, most outcomes are seen as losses in positive domains and as gains in negative domains. Utility is thus concave across outcomes in negative but convex in positive domains, inducing variance-aversion in negative and variance-seeking in positive domains. Prevention-focused and older individuals—who engage in processing that shifts reference points to less extreme instances—show a decreased sensitivity to variance. We discuss the marketing implications of preferences for variance.
Keywords
Citation
Martin, Jolie Mae, Gregory M. Barron, and Michael I. Norton. "Variance-Seeking for Positive (and Variance-Aversion for Negative) Experiences: Risk-Seeking in the Domain of Gains?" Harvard Business School Working Paper, No. 08-070, February 2008.