Article
Journal of Experimental Psychology: General

Experience Theory, or How Desserts Are Like Losses

By: Jolie M. Martin, Martin Reimann and Michael I. Norton

Format:Print

Abstract

While many experiments have explored risk preferences for money, few have systematically assessed risk preferences for everyday experiences. We propose a conceptual model and provide convergent evidence from seven experiments that, in contrast to a typical “zero” reference point for monetary gambles, reference points for experiences that are set at more extreme outcomes, leading to concave utility for negative experiences but convex utility for positive experiences. As a result, people are more risk-averse towards negative experiences, such as eating disgusting foods—as for monetary gains—but more risk-seeking towards positive experiences, such as eating desserts—as for monetary losses. These risk preferences for experiences are robust to different methods of elicitation.

Keywords

Experiences; Monetary Gambles; Risk Preferences; Experience Theory; Risk and Uncertainty; Behavior; Decision Choices and Conditions

Citation

Martin, Jolie M., Martin Reimann, and Michael I. Norton. "Experience Theory, or How Desserts Are Like Losses." Journal of Experimental Psychology: General 145, no. 11 (November 2016): 1460–1472.