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

Abstract

We often talk about interacting with information as we would with a physical good (e.g., "consuming content") and describe our attachment to personal beliefs in the same way as our attachment to personal belongings (e.g., "holding on to" or "letting go of" our beliefs). But do we in fact value information the way we do objects? The valuation of money and material goods has been extensively researched, but surprisingly few insights from this literature have been applied to the study of information valuation. This paper demonstrates that two fundamental features of how we value money and material goods embodied in Prospect Theory-loss aversion and different risk preferences for gains versus losses-also hold true for information, even when it has no material value. Study 1 establishes loss aversion for noninstrumental information by showing that people are less likely to choose a gamble when the same outcome is framed as a loss (rather than gain) of information. Study 2 shows that people exhibit the endowment effect for noninstrumental information, and so value information more, simply by virtue of "owning" it. Study 3 provides a conceptual replication of the classic "Asian Disease" gain-loss pattern of risk preferences, but with facts instead of human lives, thereby also documenting a gain-loss framing effect for noninstrumental information. These findings represent a critical step in building a theoretical analogy between information and objects, and provide a useful perspective on why we often resist changing (or losing) our beliefs.