In this episode of Choiceology with Katy Milkman (), we look at how framing a decision based on what you stand to lose versus what you stand to get impacts your tolerance of danger.
Luis Green was a participant on the popular TV video game show Deal or No Offer. The game is mostly among chance, however there are minutes during play where the candidate has a choice to accept a cash deal to give up. At one point in the video game, Luis was offered $333,000 to just leave. A guaranteed win! It appears like an obvious option. But as you'll hear from the story, there are other aspects that influenced his choice.
Katy shows these elements with a version of a popular experiment. Volunteers are presented with 2 differently worded but mathematically identical circumstances. A simple shift from framing the circumstance as a potential gain to among prospective loss results in starkly various choices from the volunteers.
Next, Katy speaks with unique visitor Daniel Kahneman () about the underlying theory that discusses human habits in these types of scenarios. Daniel Kahneman functioned as teacher of psychology and public affairs emeritus at the Woodrow Wilson School () and the Eugene Higgins Teacher of Psychology Emeritus at Princeton University () He was granted the 2002 Nobel Prize in Economics () for his pioneering research with Amos Tversky (). Their work helped establish the field of behavioral economics. Kahneman likewise composed the bestselling book Believing, Fast and Slow. ().
Finally, Katy talks with Colin Camerer () about some of his preferred studies on risk seeking in the domain of losses, in addition to practical methods for avoiding this less-than-ideal behavior. Colin Camerer is the Robert Kirby Teacher of Behavioral Financing and Economics at the California Institute of Innovation (), where he teaches cognitive psychology and economics. You can read his paper " Prospect Theory in the Wild: Proof from the Field" here ().
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