Psychological Bulletin
1993, Vol. 113, No. 3. 440-450
Copyright 1993 by the American Psychological Association, Inc.
0033-2909/93/S3.00
Motivational Factors in Decision Theories: The Role of Self-Protection
Richard P. Larrick
This article reviews the standard economic and cognitive models of decision making under risk and
describes the psychological assumptions that underlie these models. It then reviews important
motivational factors that are typically underemphasized by the standard theories, including the
motivation to protect one's self-image from failure and regret. An integrated view of decision
making is offered on the basis of a more comprehensive set of psychological assumptions.
Why do people often prefer a bird in the hand to two in the
bush? More generally, why do people often choose a certain
outcome to a risky outcome? Answering such questions is central to understanding how people make the decisions they face
everyday. Should I continue work on an established line of research or branch offinto a new, unproven line that could yield a
major contribution to the field but might also yield nothing at
all? Should I invest my year-end bonus in a certificate of deposit
(CD) that is guaranteed to pay a return of 8%, or should I invest
it in a high-risk stock that might pay a much larger return but
could also pay no return at all? Finally, should I have dinner
tonight at a restaurant I am always reasonably satisfied with, or
should I have dinner at a restaurant that has occasionally served
an outstanding meal but at other times has served a mediocre
meal?
Decision theorists assume that people's preferences for safety
or risk depend on two factors: the value people ascribe to the
outcomes of different courses of action and the probability that
each of the outcomes will occur. This way of characterizing the
decision process focuses on two questions: (a) How do people
place a value on the outcomes of their decisions? and (b) How
do people assess uncertainty and risk? Standard answers to
these questions have appealed to cognitive and psychophysical
factors underlying decision processes. The three most important theories of choice in this tradition are cardinal utility
theory (Bernoulli, 1738/1954), prospect theory (Kahneman &
Tversky, 1979), and expected utility theory (von Neumann &
Morgenstern, 1944). Although these theories make somewhat
different assumptions about the mechanisms that determine
the subjective representations of objective outcomes and proba-
bilities, they all emphasize that decisions are a function of the
probabilities and values of the outcomes of each alternative.
In this article, I argue that the traditional expectancy-value
theories of choice either have ignored important psychological
mechanisms that lead to risk preference or have postulated psychological mechanisms that incompletely or inadequately describe many actual decisions. Many decisions can be understood in terms of a desire to avoid the unpleasant psychological
consequences that result from a decision that turns out poorly.
Making a choice can be threatening to the self because a poor
outcome can undermine one's sense of competence as a decision maker. This view yields predictions and results different
from the traditional expectancy-value models of choice. By ignoring the eifect that making a choice has on the self-esteem of
the decision maker, the traditional view has overlooked important psychological processes underlying choice.
I begin by reviewing the expectancy-value perspective of
choice as presented in cardinal utility theory, prospect theory,
and expected utility theory. I go on to discuss a contrasting
perspective that incorporates motivational and affective factors
into standard expectancy-value choice models. These theories
include such factors as fear of failure and regret. The assumption these theories make is that people are concerned with how
the outcome of a decision is going to make them feel about the
decision itself. A comprehensive model of decision making is
presented that describes how people defend themselves against
adverse psychological consequences. Implications for other
aspects of the decision-making process are discussed.
Explanations of Risk Preference
People tend to avoid taking risks. They buy countless varieties of insurance to avoid the risk of large but improbable losses.
They invest in savings accounts, CDs, and money market funds
in order to avoid the risk of volatile returns from stocks and
This article was written in preparation for the doctoral dissertation
at the University of Michigan. I wish to thank Richard E. Nisbett,
Claude M. Steele, J. Frank Yates, and three anonymous reviewers for
many stimulating discussions.
The research reported in this article was supported by a National
Science Foundation (NSF) graduate fellowship to Richard P. Larrick
and in part by NSF Grant No. DBS-9121346 to Richard E. Nisbett.
Correspondence concerning this article should be addressed to
Richard P. Larrick, Organization Behavior Department, Kellogg Graduate School of Management, Northwestern University, 2001 Sheridan
Road, Evanston, Illinois 60208-2011, or beginning fall 1993, Psychology Department, Rutgers—The State University, New Brunswick, New
Jersey 08903.
440
of action thaT have the same or higher expected value. This
phenomenon is known in the decision-making literature as risk
aversion. It has been demonstrated empirically many times
(Mosteller & Nogee, 1951; Schoemaker, 1980). For example,
Kahneman and Tversky (1979) asked subjects to choose between (a) winning $3,000 for certain (80%) and (b) winning
$4,000 with an 80% probability (20%). Kahneman and Tversky
found that the majority of the subjects preferred the certain
gain to the chance of winning a larger gain. (In the original
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SELF-PROTECTION IN DECISIONS
study, these questions were posed to Israeli subjects and denominated in Israeli pounds. At the time of the study, winning 3,000
Israeli pounds was equal to winning a family's monthly income.)
Although risk aversion has commonly been assumed to hold
for all decisions (Arrow, 1971), many exceptions have been documented. For example, there is consistent evidence that people
prefer to take risks when making a choice between a certain loss
and a risky loss (Fishburn & Kochenberger, 1979; Hershey &
Schoemaker, 1980; Kahneman & Tversky, 1979). For example,
Kahneman and Tversky asked subjects to choose between (a)
losing $3,000 for certain (8%) and (b) losing $4,000 with an 80%
probability (92%). In this case, most people preferred the risky
alternative. The tendency to favor a gamble that has the same or
lower expected value than a certain outcome is known in the
decision-making literature as risk seekingness or risk proneness.
I am restricting my examination of risk preference to choices
among alternatives that yield a single, nonzero outcome with
some probability greater than 0 (up to 1.0) and that otherwise
yield nothing. A risk-averse alternative is defined as a lottery
with a higher probability of success than another alternative of
the same or higher expected value; a risk-seeking alternative is
defined as a lottery with a lower probability of success. This
conception of risk is consistent with standard definitions of risk
aversion and risk seeking (Keeney & Raiffa, 1976), although
there are many other conceptions of risk that would lead to
different ways of categorizing given alternatives (Yates, 1990;
Yates & Stone, 1992). The examination of risk preference is also
restricted to choices between alternatives for which the likelihoods of outcomes are objectively known. Although this assumption fails to hold in many actual decision situations, it is a
standard starting point for most theories of decision making.
What leads people to be risk seeking or risk averse? The explanations offered tend to fall into two categories: universal explanations and individual-difference explanations (cf. Lopes,
1987). Universal explanations posit that there are basic psychological mechanisms that are true of all people. They also propose that the nature of physical enjoyment and of cognitive
judgment are similar for all people. Two of the most prominent
universal theories are cardinal utility theory and prospect
theory. Individual-difference explanations, however, offer no
general explanations for risk preference. These theories assume
that risk preference is a function of individual differences in
attitudes and motivation. The most prominent individual-difference theories are expected utility theory, Atkinson's (1957)
theory of achievement motivation, and Lopes's (1987;
Schneider & Lopes, 1986) theory of security motivation. In the
next section, I review the universal explanations of risk preference.
sive increase in wealth is used to satisfy less important needs
(Jevons, 1871). Because money is valuable only to the extent
that it is useful for meeting needs, it becomes less useful once
the most important needs have been met (e.g., water, food,
clothing, and shelter). Consequently, only less important needs
remain. The concavity of the utility function in Figure 1 reflects
the fact that small gains are proportionately more valuable than
large gains. In making decisions under risk, people prefer certain, small gains to risky, large gains. To illustrate this point,
imagine once again that you must choose between (a) gaining
$3,000 for certain and (b) having an 80% chance of gaining
$4,000. According to Bernoulli, although the additional $4,000
is more valuable than the additional $3,000, the $4,000 will
provide proportionately less satisfaction than the $3,000. Thus,
when choosing between a certain gain of $3,000 and an 80%
chance of gaining $4,000, the extra satisfaction afforded by the
$1,000 difference is not enough to offset the 20% chance of
gaining nothing.
The concept of diminishing marginal utility became a cornerstone of economics in the 19th century. Four economists,
Gossen (1854/1983), Jevons (1871), Menger (1871/1950), and
Walras (1874/1954), independently developed the idea of marginal utility analysis to explain how choices are made under
certainty (J. F. Bell, 1967). For example, Jevons (1871) observed
that "the final degree of utility" (p. 62) that comes from the
addition of one more unit to a stock of goods "varies with the
quantity of a commodity and ultimately decreases as that quantity increases" (p. 62). Thus, most goods have diminishing marginal utility: The first orange one eats is more delectable than
the second, the third is less enjoyable, and the sixth is a cloying,
sticky mess. (Exceptions to this point are cases in which there is
a threshold effect of some sort, such as with alcohol. In this
case, the numbing sixth beer may be more enjoyable than any of
thefirstfive.)
Prospect Theory
The cardinal utility explanation of risk preference has been
adopted and modified by Kahneman and Tversky (1979) in
prospect theory. Like Bernoulli (1738/1954), Kahneman and
Tversky offer a psychophysical explanation of risk preference.
They propose that the same psychological properties that un-
Utility
U(Current wealth +$4,000)
U(Current wealth +$3,000)
U(Current wealth)
Universal Theories
Cardinal Utility Theory
The earliest explanation of risk preference was a psychophysical one. In 1738, Bernoulli (1738/1954) proposed that money
has diminishing marginal value—that is, enjoyment does not
increase proportionately with increases in wealth. The psychological justification for this assumption was that each succes-
Current
wealth
Current Current
wealth wealth
+$3,000 +$4,000
Figure 1. A cardinal utility (U) function denned over wealth.
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RICHARD P. LARRICK
derlie the perception of physical stimuli also underlie the evaluation of monetary outcomes. The particular perceptual properties they identify are (a) subjective experience is a concave function of the magnitude of physical change, which is the same
assumption made by cardinal utility theory, and (b) the perceptual system is sensitive to changes in stimulus level rather than
to absolute magnitudes. The second assumption implies that
decision outcomes are evaluated in terms of changes from a
reference point, which is usually a person's current state of
wealth. As a result, diminishing marginal value applies to gains
and to losses rather than to overall wealth. So, just as large gains
do not add much more to overall enjoyment than do small
gains, large losses do not subtract much more from overall enjoyment than do small losses. The difference in how gains and
losses are valued is captured in prospect theory's S-shaped
value function depicted in Figure 2. As a result of these differences between gains and losses, prospect theory makes the
same prediction as does cardinal utility theory in choices that
involve gains (i.e., people will be risk averse) but predicts that
people will be risk seeking in choices that involve losses. For
example, in the choice between (a) a certain $3,000 loss and (b)
an 80% chance of losing $4,000, the value function implies that
a $4,000 loss is not much more painful than a $3,000 loss.
Therefore, people prefer to take their chances on the $4,000
loss rather than settle for a certain $3,000 loss. This change in
preferences from risk aversion in gains to risk seeking in losses
is called the reflection effect (Kahneman & Tversky, 1979).
At the heart of both cardinal utility theory and prospect
theory lies the same psychophysical explanation for risk preference: The psychological intensity of an outcome diminishes
with its magnitude. The similarity between the two theories is
readily apparent in the functions they propose. The only difference is that prospect theory assumes decisions are based on
changes in wealth rather than on final states of wealth.
Note that the psychophysical explanation for risk preference
actually has nothing to do with risk. For both the cardinal utility function and the prospect theory value function, risk preference is just a by-product of how people value relative outcomes.
However, it seems obvious that people's preferences may depend not only on how they value objective outcomes but also on
how they feel about risk. Cardinal utility theory is completely
deficient in this regard. It does not discuss perceptions of or
reactions to risk. Prospect theory, on the other hand, does consider how people's perceptions of risk affect their choices. According to prospect theory, people give disproportionately
greater weight to certain outcomes than to uncertain outcomes.
The explanation for this phenomenon is once again an analogy
to perception: There is a category break between certainty and
probabilities that are less than certain. Psychologically, there is
a large difference between a probability of 1.00 and a probability of .99. The result is that the overweighting of certainty reinforces the risk preferences produced by the value function: Certain gains become even more desirable, and certain losses become even more aversive.
The strength of the universal theories is that they are elegant.
They propose that a single, hardwired mechanism guides the
decisions of all people. In this respect, however, the approach
may be too general and too basic. The psychophysical approach
to decision making fails to capture some of the more human
"Pleasure"
v(+$4,000)
v(+$3,000)
-$4,000 -$3,000
Losses
Change
in Wealth
$3,000+$4,000
Gains
v(-$3,000)
v(-$4,000)
"Pain"
Figure 2. Prospect theory's value (V) function denned over changes
in wealth from a reference point.
aspects of decision making. In fact, it appears to describe the
behavior not just of humans but of nonhumans as well. For
example, prospect theory has been translated into reinforcement theory terms and applied to research on animal learning
(Rachlin, 1989; Rachlin, Logue, Gibbon, & Frankel, 1986). In
addition, empirical tests of prospect theory have yielded mixed
support for the reflection effect prediction. The results have
been particularly weak when risk preference for gains and
losses was examined within the same individual (Hershey &
Schoemaker, 1980; Schneider & Lopes, 1986). This suggests
that other factors that affect decisions are not included in the
prospect theory account.
Overall, there are two major shortcomings to the psychophysical approach to explaining risk preference. First, it does not
consider the possibility that people might have affective responses to risk itself. Second, it assumes that basic psychological mechanisms governing judgments of risk and value are
common to all humans. Although Kahneman and Tversky
(1982) mention that "individuals differ in their attitudes toward
risk and toward money" (p. 164), the psychophysical theories
do not predict any differences between people or describe psychological mechanisms that would produce such differences.1
1
An individual-difference interpretation of prospect theory has
been suggested and investigated by several researchers (Cohen, Jaffray,
& Said, 1985, 1987; Fishburn & Kochenberger, 1979; Schneider &
Lopes, 1986). These researchers examined whether a subset of subjects
has a tendency to feel disproportionately more pleasure or pain with
large changes from their reference. This tendency preserves the two
key features of the psychophysical explanation: (a) people make judgments on the basis of reference points and (b) people's response to
changes are consistent, either showing diminishing marginal value, as
proposed by prospect theory, or increasing marginal value. If a subset
of subjects showed increasing marginal value, this would be mani-
SELF-PROTECTION IN DECISIONS
Individual-Difference
Theories
Individual-difference theories of risk preference are fundamentally different from the universal theories. The individualdifference theories are more comprehensive: They propose that
risk preference is a function of characteristics of the individual.
In a recent review of the individual-difference approach to risk
taking, Bromiley and Curley (1992) concluded that, in general,
the work on individual differences has been long on unintegrated descriptions of demographic and personality correlates
of risk taking but short on theoretical explanations. However,
in the field of decision making, there are three important theories that do provide a framework for understanding individual
differences in risk preference. Of these, the most prominent
theory is expected utility theory, which explicitly describes procedures for assessing individual differences in feelings about
risk. The other two theories, Atkinson's (1957) theory of
achievement motivation and Lopes's (1987; Schneider & Lopes,
1986) theory of security motivation, examine how people's motivational needs determine their preferences for risk.
Expected Utility Theory
Expected utility theory does not make any assumptions
about the psychological origins or experience of utilities.
Rather, its goal is purely descriptive. It seeks to summarize individuals' preferences for outcomes, to check for inconsistencies,
and to predict future choices. As long as people's choices are
consistent, a utility function can be derived that can capture
any type of risk preference: risk averse, risk seeking, risk neutral, or any combination of these. For example, to account for
the possibility that a person might buy insurance (a risk-averse
act) and play the lottery (a risk-seeking act), Friedman and Savage (1948) demonstrated that a utility function defined over
wealth could be constructed that contained both risk-averse
and risk-seeking segments. Other modifications of expected
utility theory have abandoned the assumption that utility is
defined over wealth and have incorporated the prospect theory
assumption that utility is defined over changes in wealth.
The psychological factors producing curves of various shapes
are not considered explicitly in the theory. However, two factors
have been discussed in the decision literature as producing risk
preference: (a) the value of the outcomes under certainty, which
is identical to the cardinal conception of utility previously discussed, and (b) the attitude the person has about risk. Thus, the
reason a person is risk averse is ambiguous. It is not possible to
tell whether the person actually derives less value from additional units of money, as the 19th-century economists assumed,
or whether the person simply dislikes risk. The expected utility
function contains both elements (for an overview, see Schoemaker, 1982).
Tested as risk seeking in gains and risk aversion in losses. Several studies have found that this pattern is extremely rare (Hershey & Schoemaker, 1980; Schneider & Lopes, 1986), and two studies by Cohen,
Jaffray, and Said (1985, 1987) have found that there is no systematic
relationship between preferences in gains and preferences in losses.
These results indicate that there is no empirical support for the individual-difference interpretation of the psychophysical approach.
443
To grapple with this problem, a number of techniques have
been developed to separate the value of money from feelings
about risk. These factors can be unconfounded by first having a
person assess the values of outcomes under certainty, which
yields a measure equivalent to a cardinal utility function. Then
the same person can make a series of choices under uncertainty,
which is used to derive an expected utility function. The person's risk attitude can be measured by examining the difference
between the cardinal utility function and the expected utility
function, thereby isolating that component of risk preference
that is due to like or dislike for risk rather than to diminishing
marginal value (Barren, von Winterfeldt, & Fischer, 1984; D. E.
Bell & Raiffa, 1988; Dyer & Sarin, 1979, 1982; Keeney &
Raiffa, 1976; Pratt, 1964; see Briys, Eeckhoudt, & Louberge,
1989, for a discussion of measuring risk preference when risk is
partially under the control of the decision maker). Although
there are some theoretical and practical limitations of this approach (Bromiley & Curley, 1992), it is a step toward a more
comprehensive theory.
Expected utility theory has proven problematic as a descriptive theory of choice, and many empirical violations have been
documented (Ellsberg, 1961; Slovic & Lichtenstein, 1968,1983;
Tversky & Kahneman, 1986); nonetheless, expected utility
theory and its modifications offer two improvements over the
universal theories from a heuristic viewpoint. First, it recognizes that people may hold attitudes about risk per se. Second, it
recognizes that there are individual differences in preferences
about risk. Expected utility theory's weakness, however, is that
it is short on psychological explanations for why people would
hold specific attitudes about risk or why there would be differences between people. The model treats risk preference as just
another preference: It is a given, and its psychological origin is
unquestioned. This is similar to the way risk preference is
treated when it is measured as a personality trait, such as sensation seeking (Zuckerman, 1979). Such scales in and of themselves are simply a description of risk preference rather than an
explanation. Clearly, the intent behind the development of
these measures is to relate them to explanatory variables. For
example, Zuckerman, Simons, and Como (1988) have provided
research showing that there is a biological basis for sensation
seeking (cited in Bromiley & Curley, 1992). Additional insights
concerning the reaction to risk are provided by the motivational theories of Atkinson (1957) and Lopes (1987).
Motivational Theories
Although expected utility theory allows for individual differences in attitudes about risk, it does not describe any sort of
psychological mechanism that underlies risk attitudes. Several
other individual-difference theories have, however, attempted
to fill in the psychological gaps left by expected utility theory
(Atkinson, 1957,1983; Atkinson & Raynor, 1978; Lopes, 1987;
Schneider & Lopes, 1986). These theories focus on how motivation influences people's attitudes about risk. They propose that
people do not simply respond to the enjoyment that outcomes
provide, as the psychophysical theories suggest, nor do they
simply have a set attitude about risk. Rather, people respond to
the emotional consequences of making a decision that come
from self-awareness and a sense of agency: feelings of success
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RICHARD P. LARRICK
and failure, elation and disappointment, efficacy and impotence, rejoicing and regret. The motivational theories propose
that the choices people make are often the result of a compromise between two competing desires. On the one hand, people
want to choose the option that maximizes their outcomes (in
terms of the value of the outcome); on the other hand, they
want to avoid making poor decisions that may engender feelings of failure or disappointment. The tension between these
two motives pushes decision makers toward a specific level of
risk-seeking behavior.
The most prominent of these motivational theories is Atkinson's (1957,1983; Atkinson & Raynor, 1978) theory of risk taking. Drawing on work from both social psychology (Lewin,
Dembo, Festinger, & Sears, 1944) and personality psychology
(McClelland, 1951), Atkinson proposed a model of risk taking
based on individual differences in motivation. The social psychological component of the model describes what amount of
risk provides people with the greatest sense of achievement. In
Atkinson's model, people are assumed to undertake actions
that maximize feelings of achievement, which increase with the
difficulty of the task. When the probability of success is high, it
provides very little personal satisfaction when it occurs—it's
like shooting fish in a barrel. When the probability of success is
low, people feel a great deal of satisfaction from having the skill
to overcome the odds and achieve success. These intuitions
suggest that satisfaction with achieving success is negatively
related to the probability of success (1.00 — p). Of course, people
are not likely to succeed at the very hardest tasks. Therefore, to
determine the level of risk that has the highest expected value,
satisfaction must be weighed against the probability of success.
The task that provides the optimal level of risk is the one that
maximizes expected satisfaction, p(l -00 - p), which reaches a
maximum value when the probability of success is .50. The
model predicts that people will prefer to engage in tasks at
which they expect to succeed half the time.
People differ, however, in the extent to which they are motivated to achieve, and some people are actually far more concerned with avoiding failure than with achieving success
(McClelland, 1951). Atkinson (1957) proposed that people
with a high need for achievement will choose a task that is likely
to maximize their sense of achievement, which occurs when the
probability of success is equal to .50. People with a high need to
avoid failure will choose a task that is likely to minimize their
sense of failure. The pain of a failure is directly proportional to
how easy a task is: It is not humiliating to shoot for the moon
and miss, but it is embarrassing, as the saying goes, to shoot an
arrow into the sky and miss. Thus, people who want to avoid a
sense of failure can do so by choosing tasks at which they are
certain to avoid failure (p = 1.00) or tasks at which the pain of
failure is minimal (p = .00).
The strength of Atkinson's (1957,1983; Atkinson & Raynor,
1978) theory is that it recognizes that individuals may differ in
risk preference because of psychological mechanisms related to
motivation. It also recognizes that there are emotional consequences of making a decision: People enjoy achieving their
goals and dislike failing to achieve their goals, and they take
these considerations into account when they make a decision.
There are serious limitations, however, to using this theory as a
general theory of risk preference. The main drawback is that
the model is designed to explain decisions about skilled tasks
and not about chance events. Although decades of research
have supported Atkinson's basic model, there is mixed evidence
about how well it predicts decisions made when outcomes are
randomly determined, such as in gambling experiments (Kogan & Wallach, 1964; Littig, 1966). (This raises an interesting
question: How do people react to risk that arises from variability in their own performance rather than from variability in the
environment [Heath & Tversky, 1991 ]? Unfortunately, this topic
has not received much attention in most decision-making theories.)
A second motivational theory of risky decision making has
been proposed by Lopes (1987; Schneider & Lopes, 1986),
which also contains a situational component (level of aspiration) and a personality component (need for security). The situational factor in Lopes's two-factor theory of risk preference,
level of aspiration, is defined as the size of outcome for which a
person is striving. The specific outcome to which a person
aspires depends on both internal standards (e.g., a fairly stable
estimate of what constitutes a valuable outcome) and the context of the choice (e.g., the distribution and size of the outcomes
of the other alternative). The personality factor, need for security, is measured by assessing risk aversion or risk seekingness in
a series of choices that pit a safe option against a risky option
with the same expected value. According to Lopes's model,
people who favor the sure thing are motivated to seek security—
they are assumed to focus on the worst outcomes that can occur
for each alternative. On the other hand, people who favor the
risky outcome are motivated to seek potential—they are assumed to focus on the best outcomes that can occur for each
alternative. People's preferences are assumed to be a multiplicative function of their need for security and their aspiration level.
Schneider and Lopes (1986) have shown that need for security is related to preferences over a range of gambles that differ
in variance and skewness of outcomes. For example, a gamble
that has a distribution of outcomes skewed toward zero but a
top payoff of $439 has a low probability of meeting either
group's level of aspiration; however, its great potential is enticing to risk seekers and its poor security is aversive to risk
avoiders. As predicted, this long shot was much more likely to
be favored by risk seekers than by risk avoiders. The specific
preferences of risk seekers and risk avoiders over a range of
gambles is predicted quite accurately by Lopes's (1987;
Schneider & Lopes, 1986) two-factor theory.
Despite its descriptive strength, Lopes's (1987; Schneider &
Lopes, 1986) theory is not a very comprehensive motivational
theory of decision making because of its narrow personality
mechanism. In fact, it seems tautological to select people who
are risk averse and risk seeking to predict risk preference. The
theory avoids tautology, however, because, unlike expected utility theory, risk aversion and risk seeking are used as a proxy for a
mechanism that Lopes claimed actually mediates risk preference—whether people focus on the best or worst outcomes
when making a decision. Lopes provided evidence for this
claim, both indirectly, in the pattern of observed choices, and
directly, in the protocols people provide when they make decisions (although these were not actually subjected to analysis).
Although she offers interesting suggestions about the source of
hopes and fears in everyday life, Lopes focused on a rather
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SELF-PROTECTION IN DECISIONS
narrow individual difference. Atkinson's (1957,1983; Atkinson
& Raynor, 1978) model, on the other hand, posits a slightly
more general personality mechanism—need for achievement
and avoidance of failure—but it is still fairly specific to the task
of decision making. A question addressed in this article is
whether people's preferences are affected by a more general
need for self-protection that could motivate behavior in a number of domains.
All told, the motivational approach to decision making
makes a valuable contribution to ideas about risk taking. It
introduces both extradecisional factors, such as satisfaction
with success and fear of failure, and individual differences in
motivation, such as need for security and avoidance of failure.
The motivational approach assumes that people are not just
concerned with the objective consequences of decisions but
also with the affective consequences of decisions and the motivational states that ameliorate or intensify them.
Regret Theory
Avoiding regret in risky decisions. The importance of affect
in decision making has been the focus of several theories of
anticipated regret proposed by D. E. Bell (1982,1983), Loomes
and Sugden (1982, 1987a), and Josephs, Larrick, Steele, and
Nisbett (1992). These theories represent a blending of the individual-difference approaches to decision making: They incorporate affective and motivational elements into an expected
utility framework. Regret theory proposes that people do not
simply combine probabilities and outcomes to arrive at an overall value for an alternative, as both cardinal utility theory and
prospect theory assume. Instead, once the outcomes of a decision are known, people compare the outcome of the alternative
they chose with the outcome that "might have been" if they had
chosen another alternative. This comparison will lead to either
feelings of regret—if the other alternative would have turned
out better—or rejoicing—if the other alternative would have
turned out worse (for a discussion of factors that give rise to
regret, see Kahneman & Miller, 1986, and Landman, 1987).
Because people know that they experience these feelings following a decision, they take these feelings into account before they
make a decision and calculate for each alternative how much
regret and rejoicing they are likely to feel once the outcomes are
known. For example, consider the choice between (a) a 100%
chance of winning $8 and (b) a 67% chance of winning $12.
Imagine that you choose Option B and lose. How much regret
would you feel? On the other hand, how content would you feel
if you choose Option B and won? Loomes and Sugden (1982)
proposed that the amount of regret people feel depends on how
the outcome they end up with compares to the outcome they
would have had if they had made a different choice.
The key assumption underlying the theory is that larger differences between outcomes produce disproportionately more
regret than do smaller differences, as shown in Figure 3.2 Applying the regret function to the previous example, the regret produced by choosing Option B and losing (an unfavorable $8 difference) is more than twice the regret produced by choosing
Option A and seeing Option B succeed (an unfavorable $4 difference), R(S — 0) > 2R(12 — 8). As a result, regret theory predicts that people will favor Option A over Option B because
Regret
R($8)
R($4)
$4
($12 minus $8)
($8 minus $0)
Difference between outcome of foregone option and chosen option
Figure 3. Regret theory's regret (R) function, denned over the difference between the outcome that would have been obtained (given a
different choice) and the outcome that was obtained.
Option B has a higher expectation of regret, .33/?(8 — 0), than
does Option A, .67K02 - 8). Loomes and Sugden (1982) predicted that, for most choices involving winning money, people
will avoid regret by being risk averse.
Loomes and Sugden (1987b; Loomes, 1988) have tested their
theory by having subjects make choices such as these for real
money. The effect of regret is tested by manipulating the ways
in which outcomes of different alternatives co-occur and seeing
whether these changes lead to predictable changes in preference. All told, the empirical evidence collected by Loomes and
Sugden (1987b; Loomes, 1988) and by others (Battalio, Kagel, &
Jiranyakul, 1991; Tversky, Slovic, & Kahneman, 1990) has provided only mixed support for their theory. The main drawback
to their empirical procedure appears to be a pallid manipulation. Their experiments depend on subjects noticing how the
outcomes of the alternatives are configured. Although Loomes
and Sugden's approach provides an elegant test of their theory,
it is not very robust.
A more robust test for the effect of regret is suggested by D. E.
Bell's version of regret theory. D. E. Bell (1982,1983,1985) has
proposed that the most important determinant of regret is the
presence or absence of feedback on foregone alternatives. D. E.
Bell observed that, as regret is a function of what is learned
about the outcome of the foregone alternative, it is of much
greater concern when the foregone alternative will be resolved
than when it will remain unresolved. Situations vary in how
much people expect to learn about the outcomes of their decisions: Sometimes people expect to learn nothing (e.g., when the
consequences are remote), other times people expect to learn
only about the option they have chosen but nothing about the
2
Although Loomes and Sugden (1982) do not offer a psychological
explanation for the shape of the regret function, one possibility is that
its shape is due to the perceptual processes of contrast and assimilation. Specifically, outcomes of different alternatives that are close in
value may be assimilated, whereas outcomes of different alternatives
that are discrepant in value may be contrasted.
446
RICHARD P. LARRICK
"road not taken," and other times people expect to learn about
the outcome of both the alternative they have chosen and the
alternative they have passed up. Thus, expecting vivid, concrete
feedback about what definitely would have occurred produces a
greater potential for regret than pallid, abstract knowledge of
what statistically was likely to occur.
D. E. Bell's (1983) claim received indirect support in a study
by Tindale (1989), which showed that the amount of feedback
people expected to receive affected how confident they were
about their decisions. People who expected no feedback showed
the most confidence in their decision, those who expected feedback on their chosen alternative showed an intermediate
amount of confidence, and those who expected feedback on
foregone alternatives showed the least confidence. Presumably,
the more feedback people expected to receive, the greater was
the potential for regret and the lower people's confidence. However, when Kelsey and Schepanski (1991) performed a direct
test of the relationship between feedback and risk preference,
they found that differences in the expectation of feedback did
not affect the amount of risk that people took. An explanation
for this null result was offered by Josephs et al. (1992) in a
modified version of regret theory.
Protecting the self from regret. Josephs et al. (1992) started
with the assumption that the expectation of feedback creates
the possibility for regret and added a second dimension: people's vulnerability to feeling regret. They proposed that people
want to maintain a good self-image when they make a decision
(Baumeister, Tice, & Hutton, 1989; Greenwald, 1980; Steele,
1988;Taylor&Brown, 1988;Tesser, 1988)and that regret threatens people's self-image because it can lead them to question the
wisdom of their original decision (Sugden, 1985). However, people are differentially susceptible to threats to their self-image,
and it is people who are vulnerable to feeling regret who will
make decisions that minimize the possibility of regret. The
specific variable that Josephs et al. examined was self-esteem.
In line with several social psychological theories about the self,
Josephs et al. assumed that people with low self-esteem are
more vulnerable to threats to their self-image because they have
fewer means of defending against a threat; people with high
self-esteem, on the other hand, can have a decision turn out
poorly but draw on various defenses or illusions to maintain
their positive self-image (Steele, 1988; Taylor & Brown, 1988).
For example, subjects with low self-esteem have been shown to
be more upset and more demotivated by failure (Brockner,
1979; Brockner, Derr, & Laing, 1987; Sweeney & Wells, 1990)
and less able to defend their overall self-image from failure
(Kernis, Brockner, & Frankel, 1989) than are subjects with high
self-esteem, who are more likely to use self-serving attributions
to preserve their sense of self-worth (Larrick, 1991).
Because subjects with low self-esteem are not as prepared to
deal with failure as are subjects with high self-esteem, they must
use other means to minimize the possibility of failure (see also
Baumeister et al., 1989; Baumgardner, Kaufman, & Levy,
1989). Often these means are preemptive behaviors that include
self-handicapping (Harris & Snyder, 1986; Tice, 1991); failing
strategically to lower expectations (Baumgardner & Brownlee,
1987); behaving modestly, especially in public (Baumeister et
al., 1989); and avoiding situations that can expose failure
(Strube & Roemmle, 1985). Thus, Josephs et al. (1992) proposed
that subjects with low self-esteem should be more motivated
than subjects with high self-esteem to make decisions that reduce the possibility of regret.
Several lines of evidence support the claim that people do in
fact protect their self-image when they make decisions. One
line of evidence is provided by work on cognitive dissonance
(Festinger, 1957, 1964; Wicklund & Brehm, 1976). Cognitive
dissonance theory predicts that people will feel discomfort
after making a difficult decision because the desirable aspects
of the foregone alternative and the undesirable aspects of the
chosen alternative are discrepant with the choice that was made
(Brehm, 1956). In other words, people are bothered by those
aspects of the decision that could make them regret it. Over
time, however, people rationalize their decision. Steele (1988)
has demonstrated that postdecision rationalization can be explained by the motivation to protect one's self-image. Specifically, people who have been protected from regret by being
reminded of something good about themselves show less rationalization than do people who are unprotected from regret
(Steele, 1988). Furthermore, people with high self-esteem show
less rationalization than do people with low self-esteem (Insko
& Gilmore, 1984; Steele, Spencer, & Lynch, in press).
A second line of evidence was provided by Josephs et al.
(1992; Larrick, 1991), who extended the self-protection perspective to decisions under risk. The two factors Josephs et al.
examined were (a) the amount of feedback that subjects expected and (b) the subjects' self-esteem. They proposed that
expecting to learn about the outcomes of foregone alternatives
creates the possibility for regret and having low self-esteem
makes people vulnerable to feeling regret. They tested this hypothesis in several studies that manipulated how much feedback people expected to receive about the outcomes of their
decisions. As predicted, they found that expecting to learn
about the outcomes of foregone alternatives led people with low
self-esteem to make choices that minimized the possibility of
regret. Subjects with low self-esteem were more risk averse
when they expected feedback on their decisions and were more
likely to shield themselves from learning about the outcomes of
desirable foregone alternatives. Subjects with high self-esteem,
on the other hand, never made regret-minimizing choices.
These results indicate that the ability to maintain a good selfimage in the face of regret is an important factor in determining
risk preference.
Several other studies have also examined whether people
protect their self-image by avoiding feedback on foregone alternatives. (Similar behaviors have been studied in the cognitive
dissonance literature; see Frey, 1986.) Consistent with this prediction, Northcraft and Ashford (1990) found that subjects with
low self-esteem were less likely to seek feedback on their decisions than were subjects with high self-esteem. However, other
studies have found a contrary pattern (Knight & Nadel, 1986;
Weiss & Knight, 1980); the actual relationship between self-esteem and information search may depend on whether the negative information is useful in preventing future failure (Spencer,
Josephs, & Steele, 1993).
Research on social comparison theory suggests that the
avoidance of feedback on decision outcomes may extend to
interpersonal situations as well. For example, one perspective
on social comparison theory (Festinger, 1954) contends that
SELF-PROTECTION IN DECISIONS
unfavorable social comparisons can damage a person's selfimage (Cruder, 1977; Hakmiller, 1966; Tesser, 1988; Wills,
1981). Several studies have shown that subjects with low self-esteem are more adversely affected by unfavorable social comparisons and more likely to avoid them than are subjects with high
self-esteem (Gibbons & Gerrard, 1989; Gibbons & McCoy,
1991; Smith & Insko, 1987). Social comparison is important in
decision making because people are sensitive to feedback on
other people's outcomes (McClintock & McNeel, 1966) and are
extremely dissatisfied when they receive an inferior outcome
(Loewenstein, Thompson, & Bazerman, 1989). This dissatisfaction should be even greater when another person's outcome
reflects directly on one's own decision-making ability. For example, if two people face the same decision but make different
choices, then learning of the other person's superior outcome
could lead to regret and envy. One strategy for minimizing this
threat is to avoid feedback on the other person's outcome
(Brickman & Bulman, 1977). Another strategy is to choose the
same option as the other person. The latter prevents the possibility of doing worse, and it guarantees that, if the outcome is
misery, there will at least be company. Although these hypotheses are untested, social comparison theory represents a promising area for extending the self-protection approach.
Overall, the self-protection approach offers several advantages over other theories of decision making. First, the results it
predicts and finds cannot be accounted for by the psychophysical and cognitive theories. Specifically, none of the universal
theories predicts that changing the amount of feedback people
expect to receive on the outcomes of their decision would affect
subjects' risk preferences. The expectation of feedback leads
people with low self-esteem to make defensive choices even
though the objective description of the alternatives—the probabilities and payoffs—remains constant. In addition, prospect
theory and cardinal utility theory, by proposing basic universal
mechanisms, cannot account for individual differences in risk
preference.
Second, the self-protection approach focuses on a more general psychological difference than do the individual-difference
theories of Atkinson (1957, 1983; Atkinson & Raynor, 1978)
and Lopes (1987; Schneider & Lopes, 1986). Self-image protection is not as narrow as need for achievement or need for security. It represents a general set of processes that explains behavior across a range of disparate domains. As such, it has the
potential to serve as an important unifying variable in a psychological theory of decision making. The importance of this factor suggests that other aspects of the decision process might be
fruitfully examined from this perspective. For example, one
strategy for protecting self-image is to make a choice that is easy
to justify. Then, even if the decision turns out poorly, it is still
possible to demonstrate the original merit of the decision both
to yourself (to prevent regret) and to others (to prevent embarrassment). Simonson (1989) has found that people do in fact
favor justifiable alternatives when they must choose between
alternatives that are difficult to compare. For example, is it
better to buy a gas guzzler that has a 5-year warranty but only
gets 25 miles to the gallon or a subcompact that has only a
2-year warranty but gets 42 miles to the gallon? This decision is
difficult because it is not clear how to make a trade-off between
gas mileage and warranty. In situations such as this, people
447
increase their preference for a given alternative if a similar,
inferior alternative is added to the choice set. For example, if an
inferior subcompact is added to the choice set (one that has a
1-year warranty and gets 40 miles to the gallon), people shift
their preference to the original subeompact. Simonson suggested that the new, inferior alternative makes the dominant
alternative easier to justify. In support of his contention, he
found that this effect was significantly greater when people
expected to explain their decision to someone else. Thus, in the
face of public scrutiny and potential embarrassment, people
minimized the threat by favoring the most justifiable alternative. The self-protection view suggests that some people will be
more susceptible to the threat of evaluation and more likely to
make justifiable choices. The tendency to justify choices is one
of many decision phenomena that would be interesting to study
from a self-protection perspective.
In sum, these studies support the claim that people anticipate potential negative consequences of a decision and act in
ways to defend against them. In particular, people who are
vulnerable to threats to their self-image behave in ways that
protect them from unfavorable information about their decisions. However, there are several important drawbacks to the
self-protection view of decision making. First, it only describes
how people use decisions to protect their self-image; it does not
describe how people might use the decision process to enhance
their self-image. For example, perhaps risk taking can boost
self-image. The positive consequences that decision making
might have for self-image are largely ignored in the current
version of the theory. This is significant because such factors
might be particularly important in the behavior of people with
high self-esteem. A second drawback to the self-protection perspective is that it does not specify under what conditions individuals with high self-esteem will be concerned with regret.
The theory assumes that self-esteem serves as a buffer but not
as an insurmountable one. So when the stakes are high enough,
everyone will behave defensively. At what point will people with
high self-esteem become defensive? Finally, another factor to
consider is how people might protect their self-image in ways
other than making a defensive choice. For example, perhaps
people reaffirm their competence by reminding themselves of
an important accomplishment that is unrelated to the decision
at hand. Steele (1988) has suggested this possibility, but no one
has examined it directly. Future research on the self should
provide greater understanding about self-processes and address many of these drawbacks.
Integrating Explanations for Risk Preference
Two types of psychological explanation are typically offered
in theories of decision making under risk. One type attributes
risk preference to basic processes common to all people. Theories that are based on this perspective tend to focus on
"colder" psychophysical and cognitive processes. For example,
these theories propose that fundamental physiological and perceptual mechanisms lead to universal risk preferences. The
other type of explanation attributes risk preference to individual differences. Theories that are based on this perspective
tend to focus on "hotter" affective and motivational processes.
For example, these theories propose that situational and person-
448
RICHARD P. LARRICK
ality factors heighten motivational concerns and lead to systematic differences in risk preference. Taken together, these explanations suggest that people focus on two goals when they make
decisions. One goal is to maximize their expected outcomes;
the other goal is to maintain a positive self-image. A comprehensive theory of decision making would reflect both goals.
Ideally, such a theory would also include as few parameters as
possible.
How might a comprehensive theory of decision making be
constructed? One approach would be to conduct critical tests
of different theories and retain only the most important factors.
It is not clear at this point whether such tests would tip the
scales in favor of psychophysical or motivational factors. However, constructing such critical tests might be difficult. For example, a study that had high external validity would probably
involve large, real stakes. In this case, both psychophysics and
self-relevance would be more pronounced. Thus, these factors
may be difficult to unconfound in actual studies.
A second and more fruitful approach would be to integrate
the two goals within the same theory. Of the extant theories,
expected utility theory offers the greatest potential for encompassing both of these dimensions in a formal framework. D. E.
Bell (1983,1985) has demonstrated how a utility function can
be decomposed into measures reflecting cardinal utility, attitude about risk, and attitude about regret. However, one drawback of expected utility theory that has already been discussed
is that it is not a psychological theory of decision making and is
not intended to be. It is not interested in explaining why people
hold a certain attitude about risk or regret; it simply summarizes people's preferences.
This article suggests that a psychological theory of decision
making should focus on the psychological variables that affect
the processes underlying risk preference: psychophysics and
self-protection. This characterization raises two questions: (a)
What psychological variables affect each of these processes?
and (b) What is the relationship between these processes in
determining risk preference? In response to the first question,
psychophysical factors are assumed to be relatively stable and
universal—perhaps even hardwired. Although there may be
individual differences in the psychophysics of probabilities and
outcomes, such differences have yet to be systematically identified. However, even if differences between individuals exist,
the process's hardwired nature should produce relatively stable
judgments for a given individual. On the other hand, the selfprotection dimension is more clearly influenced by personality
and situational variables. Specifically, as the threat from a situation increases, or as the person's ability to maintain a sense of
competence decreases, motivational factors will lead to more
defensive behavior.
The answer to the second question—What is the relationship
between the two processes?—may in fact be related to the issue
of stability. If psychophysical processes are indeed stable, they
should be a factor in all decisions, and they should be the strongest determinant of risk preference when motivational factors
are absent. However, as situational and personality factors
create a greater need for self-protection, people will depart
more from the psychophysical pattern in the direction of defensive behavior. In sum, I propose that psychophysical processes
lie at the core of decision making but are surrounded by a layer
of motivational processes. In the absence of threat, the motivational processes are not significant; but as the potential for
threat is increased, the motivational processes play a larger and
larger role. Although this proposal is necessarily tentative, it is
consistent with the pattern of results obtained by Josephs et al.
(1992) on regret. Such an approach should prove useful in understanding the role of other motivational factors.
Conclusion
A review of the psychological assumptions made in decisionmaking theories suggests that important factors are often ignored in cognitive and economic theories. Work by Atkinson
(1957,1983; Atkinson & Raynor, 1978); D. E. Bell (1982,1983,
1985); Josephs et al. (1992); Loomes and Sugden (1982; 1987a;
Sugden, 1985); and Lopes (1987; Schneider & Lopes, 1986) demonstrates that a complete theory of decision making must take
into account the motivational and emotional consequences of
making a decision that go beyond the stated probabilities and
outcomes of different alternatives. Such consequences are
many. Some important ones to consider are feelings that arise
from learning that a decision has turned out poorly, such as
failure, regret, and disappointment (Loomes & Sugden, 1986);
feelings that arise from publicly made decisions, such as embarrassment and pride (Simonson, 1989; Tetlock, 1985); and
feelings that arise from how outcomes are distributed among
people, such as envy and gloating (Loewenstein et al., 1989), to
name just a few. This is a tentative list, however, and much
remains to be learned about the role of such factors in decision
making.
This review proposes that a complete understanding of decision making must take into account both psychophysical and
motivational explanations of behavior. Although a comprehensive theory would not be as elegant as any of the existing theories of choice, it need not be a disjointed list of effects, either.
Instead, the central concepts of psychophysics and self-protection can serve as organizing dimensions in a complete theory of
decision making.
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Received October 18,1991
Revision received March 2,1992
Accepted April 20,1992 •