Valuing Money and Things: Why a $20 Item Can Be Worth More and Less Than $20

The study of risky decision-making has long used monetary gambles to study choice, but many everyday decisions do not involve the prospect of winning or losing money. Monetary gambles, as it turns out, may be processed and evaluated differently than gambles with non-monetary outcomes. Whereas monetary gambles involve numeric amounts that can be straightforwardly combined with probabilities to yield at least an approximate “expectation” of value, non-monetary outcomes are typically not numeric and do not lend themselves to easy combination with the associated probabilities. Compared with monetary gambles, the evaluation of non-monetary prospects typically proves less sensitive to changes in the probability range (inside the extremes of certainty and impossibility), which, among other things, can yield preference reversals. Generalizing on earlier work by Rottenstreich and Hsee (2001), which attributed similar findings to the role of affect in the evaluation process, we attribute th...

• Type: Journal
• Year: 2010
• Where: MANSCI
• Authors: A. Peter McGraw, Eldar Shafir, Alexander Todorov
• Keywords: MANSCI 2010, Monetary Gambles, Non-monetary Outcomes, Preference Reversals