Loss aversion, the endowment effect, and gain-loss framing shape preferences for noninstrumental information

Area of Science:

• Behavioral Economics
• Information Science
• Cognitive Psychology

Background:

• The valuation of material goods and money is well-researched, yet its application to information valuation is limited.
• Common language metaphors suggest information is treated like a physical possession, but empirical evidence is scarce.

Purpose of the Study:

• To investigate whether fundamental principles of economic valuation, such as loss aversion and framing effects from Prospect Theory, apply to non-instrumental information.
• To establish a theoretical analogy between the valuation of information and material objects.

Main Methods:

• Study 1: Examined loss aversion by framing information gambles as losses versus gains.
• Study 2: Tested the endowment effect for non-instrumental information.
• Study 3: Replicated gain-loss framing effects using factual information, analogous to the "Asian Disease" problem.

Main Results:

• Loss aversion was demonstrated, with participants less willing to gamble when information loss was framed as a loss.
• The endowment effect was observed, increasing information value simply through ownership.
• Gain-loss framing effects were confirmed for non-instrumental information, mirroring patterns seen with monetary or life-affecting outcomes.

Conclusions:

• Non-instrumental information valuation shares key characteristics with the valuation of material goods, including loss aversion and endowment effects.
• These findings provide insights into why individuals often resist changing their beliefs, framing them as losses.
• The study builds a theoretical bridge between information and object valuation, highlighting cognitive biases in information processing.