http://www.sciencedirect.com/science/article/pii/0749597890900222

The function of the reference point in individual and group risk decision making

Tatsuya Kameda , James H Davis

University of Illinois at Urbana-Champaign U.S.A.

Received 1 April 1988; Available online 27 July 2004.


AbstractThe function of the reference point was studied with individuals and groups deciding among bets. Prospect Theory (Kahneman & Tversky, 1979) asserts that a psychological reference point is influenced by recent changes in one's current asset. Based on this notion, a person who has experienced losses recently was predicted to make riskier choices than a person who has not, but no systematic risk preference was expected for a person experiencing recent gains. Subjects' individual choices were generally consistent with these notions, although one of the key assumptions of the theory was violated. Assuming that a loss person will have a greater influence over a group decision, a group containing a loss member was anticipated to make riskier decisions than a group that does not. The results of three-person group decisions did not show this pattern; instead, the idiosyncratic risky preference of a loss member was found to be overridden by majority influence from nonloss members. Discussion focused on the implications of the loss member's idiosyncratic choice and of the robustness of social/normative factors relative to task/ individual factors.