Yana Litovsky © Litovsky
Through technical progress, it is now possible to store an almost unlimited amount of information and data. We all make active use of this. In a study published in the journal PNAS, economists and psychologists from the University of Innsbruck and Carnegie Mellon University (USA) show that we are just as attached to information as we are to physical objects.
The fact that information - and personal beliefs or opinions derived from it - are important to us is evident even in our use of language: "We describe our attachment to personal beliefs, for example, as holding on to or letting go of something - breaking away from a long-held conviction or holding on to an opinion," explains Yana Litovsky, PhD, from the Institute of Banking and Finance at the University of Innsbruck. However, while the personal valuation of money and material goods has been extensively studied in economics, little research has focused on the similarity between the valuation of goods and information.This is a gap that Yana Litovsky and colleagues at Carnegie Mellon University (CMU) aim to fill with a study recently published in the Proceedings of the National Academy of Sciences (PNAS).
Game Theory
According to the conventional wisdom in economics and game theory, people value information only to the extent that this information supports decisions that lead to (also materially) better outcomes. However, this view does not fully explain how individuals deal with information: For example, we are willing to pay even for information with no tangible benefit to us, such as gossip magazines. We also tend to avoid information that we believe contradicts our beliefs and consume news only from sources we like - even if this information could be objectively useful to us.
In three studies with more than a thousand participants, the researchers demonstrated that people treat information gains and losses like gains and losses of goods: as valued possessions. Loss aversion (the tendency to value losses more significantly than equivalent gains) and the endowment effect (the tendency to value objects that we own more highly than identical objects that we do not own) have been shown in three studies.(the tendency to value objects we own more highly than identical objects we do not own) apply not only to money and material goods, but also to information - even to largely useless information, such as random gaps in knowledge.
Although the three studies focused on information that is largely irrelevant to individuals, the authors assume that the results can also be applied to important information. "In situations where people are expected to acquire important information, knowledge of this behavior may well be relevant, for example in education or health care," explains Yana Litovsky. The findings are also relevant in relation to online privacy - for example, understanding if and when consumers* consider personal information to be possessions can also help to understand their attitudes towards the collection and sharing of such information by companies and governments. "That we have now identified loss aversion and endowment effects for information may be particularly important in the digital age. Today’s unprecedented access to information has complicated and may also change the way we value that information."
The research was supported by the Austrian Science Fund FWF.
Publication:
Litovsky/Loewenstein/Horn/Olivola: Loss aversion, the endowment effect, and gain-loss framing shape preferences for noninstrumental information, PNAS Vol. 119, No. 34, August 23, 2022, DOI: 10.1073/pnas.2202700119 https://dx.doi.org/10.1073/pnas.2202700119
