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Saturday, November 12, 2022

Loss aversion, the endowment effect, and gain-loss framing shape preferences for noninstrumental information

Litovsky, Y. Loewenstein, G. et al.
PNAS, Vol. 119 | No. 34
August 23, 2022


We often talk about interacting with information as we would with a physical good (e.g., “consuming content”) and describe our attachment to personal beliefs in the same way as our attachment to personal belongings (e.g., “holding on to” or “letting go of” our beliefs). But do we in fact value information the way we do objects? The valuation of money and material goods has been extensively researched, but surprisingly few insights from this literature have been applied to the study of information valuation. This paper demonstrates that two fundamental features of how we value money and material goods embodied in Prospect Theory—loss aversion and different risk preferences for gains versus losses—also hold true for information, even when it has no material value. Study 1 establishes loss aversion for noninstrumental information by showing that people are less likely to choose a gamble when the same outcome is framed as a loss (rather than gain) of information. Study 2 shows that people exhibit the endowment effect for noninstrumental information, and so value information more, simply by virtue of “owning” it. Study 3 provides a conceptual replication of the classic “Asian Disease” gain-loss pattern of risk preferences, but with facts instead of human lives, thereby also documenting a gain-loss framing effect for noninstrumental information. These findings represent a critical step in building a theoretical analogy between information and objects, and provide a useful perspective on why we often resist changing (or losing) our beliefs.


We build on Abelson and Prentice’s conjecture that beliefs are not merely valued as guides to interacting with the world, but as cherished possessions. Extending this idea to information, we show that three key phenomena which characterize the valuation of money and material goods—loss aversion, the endowment effect, and the gain-loss framing effect—also apply to noninstrumental information. We discuss, more generally, how the analogy between noninstrumental information and material goods can help make sense of the complex ways in which people deal with the huge expansion of available information in the digital age.

From the Discussion

Economists have traditionally treated the value of information as derivative of its consequences for decision-making. While prior research on noninstrumental information has shown that this narrow view of information may be incomplete, only a few accounts have attempted to explain intrinsic preferences for information. One such account argues that people seek (or avoid) information inasmuch as doing so helps them maintain their cherished beliefs. Another proposes that people choose which information to seek or avoid by considering how it will impact their actions, affect, and cognition. Yet, outside of the curiosity literature, no existing account of information valuation considers preferences for information that has neither instrumental nor (concrete) hedonic value. By showing that key features of Prospect Theory’s value function also apply to individuals’ valuation of (even noninstrumental) information, the current paper suggests that we may also value information in some of the same fundamental ways that we value physical goods.