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Bang for the buck: gain-loss ratio as a driver of judgment and choice

Research output: Contribution to Journal/Magazine › Journal article › peer-review

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Bang for the buck: gain-loss ratio as a driver of judgment and choice. / De Langhe, Bart; Puntoni, Stefano.
In: Management Science, Vol. 61, No. 5, 05.2015, p. 1137-1163.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

De Langhe, B & Puntoni, S 2015, 'Bang for the buck: gain-loss ratio as a driver of judgment and choice', Management Science, vol. 61, no. 5, pp. 1137-1163. https://doi.org/10.1287/mnsc.2014.2045

APA

De Langhe, B., & Puntoni, S. (2015). Bang for the buck: gain-loss ratio as a driver of judgment and choice. Management Science, 61(5), 1137-1163. https://doi.org/10.1287/mnsc.2014.2045

Vancouver

De Langhe B, Puntoni S. Bang for the buck: gain-loss ratio as a driver of judgment and choice. Management Science. 2015 May;61(5):1137-1163. Epub 2014 Dec 3. doi: 10.1287/mnsc.2014.2045

Author

De Langhe, Bart ; Puntoni, Stefano. / Bang for the buck : gain-loss ratio as a driver of judgment and choice. In: Management Science. 2015 ; Vol. 61, No. 5. pp. 1137-1163.

Bibtex

@article{987542cf96f54c9e95442288a167b8ba,
title = "Bang for the buck: gain-loss ratio as a driver of judgment and choice",
abstract = "Prominent decision-making theories propose that individuals (should) evaluate alternatives by combining gains and losses in an additive way. Instead, we suggest that individuals seek to maximize the rate of exchange between positive and negative outcomes and thus combine gains and losses in a multiplicative way. Sensitivity to gain-loss ratio provides an alternative account for several existing findings and implies a number of novel predictions. It implies greater sensitivity to losses and risk aversion when expected value is positive, but greater sensitivity to gains and risk seeking when expected value is negative. It also implies more extreme preferences when expected value is positive than when expected value is negative. These predictions are independent of decreasing marginal sensitivity, loss aversion, and probability weighting—three key properties of prospect theory. Five new experiments and reanalyses of two recently published studies support these predictions.",
keywords = "gain-loss ratio, efficiency, decreasing marginal sensitivity, loss aversion, probability weighting, prospect theory, risk preference, mixed gambles",
author = "{De Langhe}, Bart and Stefano Puntoni",
note = "Date of Acceptance: 26/06/2014",
year = "2015",
month = may,
doi = "10.1287/mnsc.2014.2045",
language = "English",
volume = "61",
pages = "1137--1163",
journal = "Management Science",
issn = "0025-1909",
publisher = "INFORMS Inst.for Operations Res.and the Management Sciences",
number = "5",

}

RIS

TY - JOUR

T1 - Bang for the buck

T2 - gain-loss ratio as a driver of judgment and choice

AU - De Langhe, Bart

AU - Puntoni, Stefano

N1 - Date of Acceptance: 26/06/2014

PY - 2015/5

Y1 - 2015/5

N2 - Prominent decision-making theories propose that individuals (should) evaluate alternatives by combining gains and losses in an additive way. Instead, we suggest that individuals seek to maximize the rate of exchange between positive and negative outcomes and thus combine gains and losses in a multiplicative way. Sensitivity to gain-loss ratio provides an alternative account for several existing findings and implies a number of novel predictions. It implies greater sensitivity to losses and risk aversion when expected value is positive, but greater sensitivity to gains and risk seeking when expected value is negative. It also implies more extreme preferences when expected value is positive than when expected value is negative. These predictions are independent of decreasing marginal sensitivity, loss aversion, and probability weighting—three key properties of prospect theory. Five new experiments and reanalyses of two recently published studies support these predictions.

AB - Prominent decision-making theories propose that individuals (should) evaluate alternatives by combining gains and losses in an additive way. Instead, we suggest that individuals seek to maximize the rate of exchange between positive and negative outcomes and thus combine gains and losses in a multiplicative way. Sensitivity to gain-loss ratio provides an alternative account for several existing findings and implies a number of novel predictions. It implies greater sensitivity to losses and risk aversion when expected value is positive, but greater sensitivity to gains and risk seeking when expected value is negative. It also implies more extreme preferences when expected value is positive than when expected value is negative. These predictions are independent of decreasing marginal sensitivity, loss aversion, and probability weighting—three key properties of prospect theory. Five new experiments and reanalyses of two recently published studies support these predictions.

KW - gain-loss ratio

KW - efficiency

KW - decreasing marginal sensitivity

KW - loss aversion

KW - probability weighting

KW - prospect theory

KW - risk preference

KW - mixed gambles

U2 - 10.1287/mnsc.2014.2045

DO - 10.1287/mnsc.2014.2045

M3 - Journal article

VL - 61

SP - 1137

EP - 1163

JO - Management Science

JF - Management Science

SN - 0025-1909

IS - 5

ER -