The arithmetic of outcome editing in financial and social domains

Kinga Barrafrem,Gustav Tinghög,Daniel Västfjäll

doi:10.1016/j.joep.2021.102408

Kinga Barrafrem, Gustav Tinghög + Show 1 more

Open Access

https://doi.org/10.1016/j.joep.2021.102408

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Abstract

Outcome editing refers to a set of mental rules that people apply when deciding whether to evaluate multiple outcomes jointly or separately, which subsequently affects choice. In a large-scale online survey (n = 2062) we investigate whether individuals use the same outcome editing rules for financial outcomes (e.g., a lottery win) and social outcomes (e.g., a party with friends). We also test the role of numeric ability in explaining outcome editing. Our results show that people’s preferences for combining or separating events depend on whether those events are in the financial or the social domain. Specifically, individuals were more likely to segregate social outcomes than monetary outcomes, except for when all outcomes were negative. Moreover, numeric ability was associated with preferences for outcome editing in the financial domain but not in the social domain. Our findings extend the understanding of the arithmetic operations underlying outcome editing and suggest that people rely more on calculations when making choices involving multiple financial outcomes and more on feelings when making choices involving social outcomes.

Highlights

Outcome editing refers to the idea that people use simple mental rules for combining or separating multiple events before their evaluation (Thaler, 1985)
To foster a better understanding of outcome editing across domains, we investigate if outcome editing can be explained using the notion of numeracy
1 this study focuses solely on outcomes, it is important to note that outcome editing can be applied to other multidimensional options, such as products with multipurpose use, transactions, or risky choices, in which outcomes and probabilities can be considered together or separately (Du & Budescu, 2021)

Summary

Introduction

Outcome editing refers to the idea that people use simple mental rules for combining or separating multiple events before their evaluation (Thaler, 1985). Understanding how people edit outcomes is crucial for understanding many parts of everyday behavior such as coping strategies, price perceptions, financial decisions, subjective well-being, and evaluation of experiences (see e.g., Ariely & Zauberman, 2000; Cowley, 2008; Lim, 2006; Liu, 2013; Ranyard, Hinkley, Williamson, & McHugh, 2006; Sul, Kim, & Choi, 2016). How people choose to arrange multiple events in time can alter the appeal of different outcomes. Experiencing a negative event (e.g., getting a parking ticket) might be evaluated as less bad when it is combined with a positive event (e.g., receiving a bonus at work) compared to if these events are evaluated separately, and individuals might want to integrate negative outcomes with positive ones to feel happier. We explore the role of numerical ability in outcome editing across domains

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