Conflict and Loss Aversion in Multiattribute Choice: The Effects of Trade-Off Size and Reference Dependence on Decision Difficulty

Two experiments assess the type and amount of conflict influencing decision difficulty in hypothetical scenarios where subjects chose between two alternatives made to appear relatively attractive (approach-approach conflicts) or relatively unattractive (avoidance-avoidance conflicts), each involving attribute trade-offs across alternatives (embedded approach-avoidance conflicts). In Experiment 1, independent of information processing demands, decisions are more difficult when alternatives are unattractive and/or attribute trade-offs are large. Reference states that change the relative attractiveness of the alternatives increase or decrease decision difficulty in a manner consistent with loss aversion: Superior reference states increase decision difficulty more than inferior reference states reduce it. Experiment 2 further tests the reference dependence of decision difficulty by varying the nature of the reference state (stated comparators, as in Experiment 1, or endowments) as well as its extremity. Endowed reference states affect decision difficulty more than reference states that are stated comparators. Moreover, consistent with loss aversion, inferior reference states that are twice as extreme as superior reference states reduce decision difficulty about as much as the superior reference states increase it. The results demonstrate that decisions can be made easier or harder by way of reference dependence, and that the loss aversion so prevalent in preference formation generalizes to perceptions of decision difficulty in multiattribute settings.