Valence in Context: Asymmetric Reactions to Realized Gains and Losses

The current research documents a novel pattern of preferences across nominally equivalent outcomes. When evaluating the outcome of completed experiences, people are sensitive to the magnitude of component (i.e., gross) gains and losses rather than responding solely to the net outcomes. However, people do not consistently favor outcomes that minimize losses (a pattern consistent with loss aversion), nor those that maximize gains (a pattern consistent with a positivity bias). Instead, preferences are context dependent. Holding net outcomes constant, people prefer positive outcomes that have lower magnitudes of component gains and losses. In contrast, people prefer negative outcomes that have higher magnitudes of component gains and losses. A shift in focus occurs such that people prioritize the contrasting attribute (e.g., negative when the net outcome is positive) in the evaluation process. The article concludes by discussing implications for a broad range of judgments and decisions.