Is loss aversion magnitude dependent?

Prospect Theory proposed that the (dis)utility of losses is always more than gains due to a phenomena called ‘loss-aversion’, a result obtained in multiple later studies over the years. However, some researchers found reversed or no loss-aversion for affective judgments of small monetary amounts but, those findings have been argued to stem from the way gains versus losses were measured. Thus, it was not clear whether loss-aversion does not show with affective judgments for smaller magnitudes, or it is a measurement error. This paper addresses the debate concerning loss-aversion (in the prospect theoretic sense) and judgments about the intensity of gains and losses. We measured affective prospective judgments for monetary amounts using measurement scales that have been argued to be suitable for measuring loss-aversion and hence rule out any explanations regarding measurement. Both in a gambling scenario  and in the context of fluctuating prices, potential losses never loomed larger than gains for low magnitudes, indicating that it is not simply a measurement error. Moreover, for the same participant, loss aversion was observable at high magnitudes. Further, we show that loss-aversion disappears even for higher monetary values, if contextually an even larger anchor is provided. The results imply that Prospect Theory’s value function is contextually dependent on magnitudes.

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. [Download PDF]

Isn’t it yet time for the Indian government

Indian psychologists have been discussing multiple important issues relevant for social development but with limited success in seeing their insights being implemented in actual government policy making. With new governments and major drives for social development, is it not yet time to make behavioral science an important knowledge domain for social planning? Placed in contrast to USA, this article underscores the present need for more engaging dialogues between Indian academic psychologists, organizations and the government and also suggests some preliminary directions.

Keywords

Behavioral science Public policy Social Planning India

Citation:
Mukherjee, S. (2016). Isn’t It Yet Time for Indian Government to Have a Behavioral Science Unit?. Psychological Studies, 61(2), 91-95.  doi:10.1007/s12646-016-0357-7

Prosocial bonus and corporate social responsibility spending

A prosocial bonus is money given to people that needs to be spent on others. This article suggests a new way of implementing corporate social spending by involving the employees using ‘prosocial bonuses’. Such a policy can potentially serve a dual benefit of improving employee satisfaction and help companies reach the mandate for social spending. We examined predicted satisfaction from choosing between pro-self and prosocial bonuses when both options were presented simultaneously. Previous discussions stated that people predict higher satisfaction from spending on the self, compared to spending money on others. In contrast, we found that predicted satisfaction from opting to spend on the poor can be higher (experiment 1) or equal (experiment 2) to spending a bonus on oneself.  We argue that this is possible when spending options are evaluated simultaneously. The major motivation for spending on the poor was to positively impact lives. A prosocial employee incentive policy could be built into corporate social responsibility programmes that benefit both the company and increase social welfare, especially in developing countries like India.


 

Mukherjee, S. & Sahay, A. (in press). Predicted satisfaction from simultaneous evaluation of prosocial and pro-self employee bonus schemes: Towards a new form of management strategy for corporate social spending. Psychological Studies .  doi:10.1007/s12646-015-0349-z

Price discount framings on product bundles with shipping surcharges in the Indian market

The purpose of this paper is to study how consumers process price frames of product bundles (product plus surcharge) and discount offers to weigh contentious positions between the weighted-additive and the reference-dependent models. Further, some research suggests bundling, while others suggest partitioning to be a more effective pricing strategy. This research evaluated the relative influences of different price frames to examine which model is supported and what are the boundary conditions for price framing.

Two online studies were conducted on Indian adults who had prior experiences of online purchases. They were asked to judge attractiveness of bundles (product along with shipping surcharge). Discounts were shown on the product, the surcharge or on the overall bundle either as partitioned prices or as a bundle.

Across two studies on low- and high-priced products, discounts on shipping surcharge increased attractiveness of the bundle compared to a similar discount on the product or on the overall bundle, supporting the reference-dependent model. Further, for a low-priced product, bundling increased attractiveness, while for a high-priced product, partitioning was more attractive. More research is needed to examine whether these results translate to other kinds of products, surcharges or discount promotions and in different populations.

This research makes important contributions to theoretical and practical aspects of bundling and partitioned pricing research. It also adds much needed data about evaluation of product bundles with shipping surcharges among Indian customers.


Sahay, A.,  Mukherjee, S., & Dewani, P. P. (2015) “Price discount framings on product bundles with shipping surcharges in the Indian market: Examining the weighted-additive and reference-dependent models”, Journal of Indian Business Research,  7(1), 4 – 20 DOI – http://dx.doi.org/10.1108/JIBR-05-2014-0026

Global processing fosters donations toward charity appeals framed in an approach orientation

People can zoom in (focus attention) or zoom out (distribute attention). It is possible to induce these two procedural modes in the lab by asking people to either process global letters or local letters. We found that after asking people to process either the global or local letters and then presenting charities varying in the orientation of the charity appeal; those who perform a global task are more inclined to foster donations to an approach oriented appeal.

A sample of global letters (6,9,H,S made up of 8) are below:

global letters sample thesis

Local letters would be a 8 made up of 6,9,H,S.

So, half of the people did a global letter counting task and half did a local letter counting task. Then they saw two messages of two charities which were similar in content but framed either in an approach orientation (positive tone) or avoidance orientation (negative tone). Those who did the global task, suggested more portion of money be given to the approach oriented appeal.

Mukherjee, S., Srinivasan, N., & Manjaly, J.A. (2014). Global processing fosters donations toward charity appeals framed in an approach orientation. Cognitive Processing, 15(3),391-396.  doi:10.1007/s10339-014-0602-8

Money makes you reveal more

MEDIA MENTION : Times of India newspaper (pdf) (html)

With continuous growth in information aggregation and dissemination, studies on privacy preferences are important to understand what makes people reveal information about them. Previous studies have demonstrated that short-term gains and possible monetary rewards make people risk disclosing information. Given the malleability of privacy preferences and the ubiquitous monetary cues in daily lives, we measured the contextual effect of reminding people about money on their privacy disclosure preferences. In experiment 1, we found that priming money increased willingness to disclose their personal information that could be shared with an online shopping website. Beyond stated willingness, experiment 2 tested whether priming money increases propensity for actually giving out personal information. Across both experiments, we found that priming money increases both the reported willingness and the actual disclosure of personal information. Our results imply that not only do short-term rewards make people trade-off personal security and privacy, but also mere exposure to money increases self-disclosure.

Mukherjee, S., Manjaly. J.A ., & Nargundkar, M. (2013). Money makes you reveal more: Consequences of monetary cues on preferential disclosure of personal information. Frontiers in Psychology 4:839doi: 10.3389/fpsyg.2013.00839

Money cues influence life-satisfaction predictions for new educational institutes

The relationship between money and happiness has always been one of hide and seek. Does having more money lead to greater life-satisfaction? Literature so far directed to two opposing directions. Some studies show that greater income leads to greater life-satisfaction, while others show otherwise. Economic theories on happiness suggest that with greater income happiness increases while psychological theories suggest that interpersonal relationships and health concerns are major components of life-satisfaction.

We decided to adopt a novel approach to study the relationship between money and life-satisfaction. Instead of focusing on the actual financial background, students were shown pictures of money to activate the concept of money in the mind. This procedure is called priming in social science research. Students were asked to rate their own life-satisfaction on a scale and were also asked to predict happiness and life-satisfaction for students at new Indian Institutes of Technology (IITs) and at old IITs. Half of the students (money group) were given this task on a paper which had pictures of money in the background. Another half (non-money group) completed the same task on papers which had a scrambled version of the same picture in the background that was beyond recognition. Two such experiments were conducted with students at IIT Gandhinagar and IIT Bombay. It was found that the background pictures did not affect self-satisfaction judgments among students both at IIT Gandhinagar and IIT Bombay. Monetary backgrounds however increased predicted differences in life-satisfaction between new and old IIT students at both the IITs. In fact, money lowered the life-satisfaction judgments of students at new IITs. The authors attributed the findings to the market-pricing mode of thought that may be brought on by mere reminders of money. Money might activate uncertainty about life in the campus of the new IITs, both among students who study themselves in a new IIT or in an old IIT. The researchers think that such kind of research would help understand student life-satisfaction and aid educational policies. It is interesting to find that simply activating the concept of money might change our beliefs and expectations.

Mukherjee, S., Nargundkar, M., & Manjaly, J.A. (2014). Monetary primes increase differences in predicted life-satisfaction between new and old Indian Institutes of Technology (IITs). Psychological Studies, 59(2), 191-196. doi:10.1007/s12646-014-0259-5