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Policy Bundling to Overcome Loss Aversion: A Method for Improving Legislative Outcomes

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Author Info

  • Katherine L. Milkman

    ()
    (The University of Pennsylvania)

  • Mary Carol Mazza

    ()
    (Harvard Business School, Negotiation, Organizations and Markets Unit)

  • Lisa L. Shu

    ()
    (Harvard Business School, Organizational Behavior Unit)

  • Chia-Jung Tsay

    ()
    (Harvard Business School, Negotiation, Organizations and Markets Unit)

  • Max H. Bazerman

    ()
    (Harvard Business School, Negotiation, Organizations and Markets Unit)

Abstract

Policies that would create net benefits for society but would also involve costs frequently lack the necessary support to be enacted because losses loom larger than gains psychologically. To reduce the harmful consequence of loss aversion, we propose a new type of policy bundling technique in which related bills that have both costs and benefits are combined. In our first laboratory study, we confirm across a set of four legislative domains that this bundling technique increases support for bills that have both costs and benefits. We also show in a second study that this effect stems from a diminished focus on losses and heightened focus on gains when policies are evaluated in bundled form.

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File URL: http://www.hbs.edu/research/pdf/09-147.pdf
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Bibliographic Info

Paper provided by Harvard Business School in its series Harvard Business School Working Papers with number 09-147.

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Length: 19 pages
Date of creation: Jun 2009
Date of revision: Dec 2009
Handle: RePEc:hbs:wpaper:09-147

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Related research

Keywords: loss aversion; policy bundling; behavioral economics;

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Cited by:
  1. Frey, Bruno S. & Gallus, Jana, 2013. "Aggregate effects of behavioral anomalies: A new research area," Economics Discussion Papers 2013-51, Kiel Institute for the World Economy.

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