Valuing Money and Things: Why a $20 Item Can Be Worth More and Less Than $20
A. Peter McGraw, Eldar Shafir and Alexander Todorov argue that research on risky choice has leaned on monetary gambles, and that monetary and nonmonetary outcomes are valued differently. A sum of money can be combined with a probability to give at least a rough expected value, while most nonmonetary outcomes cannot. People's evaluations of nonmonetary prospects are therefore less responsive to changes in probability between certainty and impossibility, which can produce preference reversals. The authors extend Rottenstreich and Hsee's affect account by attributing the pattern to a basic difference in how the two kinds of outcome are valued, and they warn about the risks of studying choice with monetary gambles alone.
A. Peter McGraw, Eldar Shafir and Alexander Todorov argue that research on risky choice has leaned on monetary gambles, and that monetary and nonmonetary outcomes are valued differently. A sum of money can be combined with a probability to give at least a rough expected value, while most nonmonetary outcomes cannot. People's evaluations of nonmonetary prospects are therefore less responsive to changes in probability between certainty and impossibility, which can produce preference reversals. The authors extend Rottenstreich and Hsee's affect account by attributing the pattern to a basic difference in how the two kinds of outcome are valued, and they warn about the risks of studying choice with monetary gambles alone.
Written from the abstract read 2026-10-22 via the IDEAS (RePEc) record.
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McGraw, A. P., Shafir, E., & Todorov, A. (2010). Valuing Money and Things: Why a $20 Item Can Be Worth More and Less Than $20. Management Science, 56(5), 816-830. doi:10.1287/mnsc.1100.1147.