Prospect Theory in Social Conflict: How Framing Affects Decision Outcomes

Abstract: This study investigates the role of fault and responsibility as moderating the effects of individual and collective loss aversion within social conflict. Recent literature finds that (1) the negotiation process is affected by how negotiators perceive their situation cognitively (Schweitzer et al., 2005) and (2) that decision makers are loss averse (Tversky & Kahneman, 1981). Specifically, framing outcomes in terms of losses versus gains influences negotiator behavior (Neale et al., 1987), negotiation outcome (Bazerman et al., 1985; Bottom & Studt, 1993), and perceptions of fairness (Zhang, 2008). However, research has yet to test the ways in which these effects interact with perception of fault and responsibility. Considering the ability to dialogue about issues as joint problems is one indicator of functional conflict (Gottman, 2011), understanding how these frames interact with loss aversion provides insight into how decision- makers understand and resolve conflict.

Keywords: Prospect theory, negotiation, functional conflict

Topic: DEC   |   Format: Extended Abstract