Department of Political Science

Prospect Theory and Public Service Outcomes: When do Citizen Prefer Risky Reforms to Reforms with Certain Outcomes?

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Prospect theory (Kahneman and Tversky 1979; Tversky and Kahneman 1992) has been widely acknowledged in the social sciences as a potential frame for understanding how people deal with uncertainty. Yet, little is known about whether key expectations from prospect theory also hold in a complex public service setting with outcomes in multiple dimensions. In this paper I draw on prospect theory to examine under what conditions citizens prefer uncertain – but potentially advantageous – reforms to reforms with more certain outcomes. Using a population based survey experiment with participation of 1,395 Danish citizens I find support for some of the expectations derived from prospect theory while the evidence is in outright opposition to the expectations in other instances. Most notably, I find that that citizens are more willing to take risks if reforms are associated with gains than if they are associated with losses; a finding which is at odds with the so-called reflection effect. The findings suggest that prospect theory should be applied with caution to complex settings with multi-dimensional outcomes.
Original languageEnglish
Publication year2016
Number of pages25
Publication statusPublished - 2016
EventTrans-Atlantic Dialogue 2016 - Gent, Belgium
Duration: 8 Jun 201610 Jun 2016

Conference

ConferenceTrans-Atlantic Dialogue 2016
CountryBelgium
CityGent
Period08/06/201610/06/2016

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