Loss Aversion

Stakeholder communication can backfire in unexpected ways.

Common business habits are unwittingly influenced by psychological phenomena. One particular phenomenon that has far-reaching consequences is called loss aversion.

In my previous article — about The Ultimatum Game — I told you about Dutch primatologist and ethologist Frans de Waal, who has done a lot of research over the years on the behavior of apes and monkeys. There is another scientist carrying out experimental games with monkeys and other non-human animals — like dogs — and that is professor of psychology Laurie Santos of Yale University. She has done quite a few very intricate games with capuchins to see if their economic behavior matches our irrational human economic behavior. We’ve already seen that De Waal made capuchins angry by giving them pieces of cucumber instead of grapes, and Santos took things a step further.

In one experiment, she had a colleague show a monkey one grape and then subsequently give him either one grape, or two grapes, at random. Another monkey was shown two grapes and then — again, at random — given either one or two grapes. So, to be clear about this, the end result was exactly the same for the monkeys — they were given either one or two grapes at random. The beginning was a different experience for them, however, and the question was…