Preference Reversals and the Reflection Effect: the Moderating Role of Uncertainty Avoidance

Prospect Theory’s reflection hypothesis predicts that people are risk averse in gains and risk seeking in losses. In three experiments, we show that the reflection effect is moderated by an individual’s tendency to avoid uncertainty (UA). While lower UA individuals show the predicted reflection effect, higher UA individuals prefer certainty in both gains and losses and demonstrate uniform risk aversion. The latter tend to focus on avoiding the worst outcome (e.g., lose the most money) and avoid a risky loss, contrary to their lower UA counterparts who focus on getting the best outcome (e.g., lose nothing). Implications of the findings are discussed in the context of introducing new products in higher UA cultures.



Citation:

Subimal Chatterjee and David W. Taylor (2005) ,"Preference Reversals and the Reflection Effect: the Moderating Role of Uncertainty Avoidance", in E - European Advances in Consumer Research Volume 7, eds. Karin M. Ekstrom and Helene Brembeck, Goteborg, Sweden : Association for Consumer Research, Pages: 595-596.

Authors

Subimal Chatterjee, Binghamton University
David W. Taylor, Binghamton University



Volume

E - European Advances in Consumer Research Volume 7 | 2005



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