CHRONIC LOSS AND DECISION MAKING
loss
Each day, people are faced with consequential decisions that are characterized by uncertain outcomes. Some of these decisions result in tangible gains, or in other words, outcomes that improve the welfare of the decision maker. In other cases, these decisions result in losses, which may lead to a decline in overall welfare. For many people—e.g., those living in much of the developed world—there exists a balance with respect to the degree to which losses and gains are experienced (e.g., fluctuations between financial gains and losses achieved as a result of investment decisions over a lifetime). In some cases, however, losses occur much more frequently than gains. And in some instances, these losses can be chronic in nature.

Chronic loss can be defined as the experience of multiple, consecutive losses or negative outcomes in single or in related contextual domains. Consider, for example, the Prairie View A&M University football team, which between 1989 and 1998 endured a losing streak of 80 consecutive games. There is also the case of the television actor Susan Lucci who, between 1978 and 1998 received 18 consecutive Daytime Emmy Award nominations for her work on the program All My Children before finally winning her first award in 1999.

Of course, the experience of chronic loss is not isolated to sports and entertainment and its long-term outcomes can be far from trivial. Consecutive losses via pathological gambling routinely results in significant social and financial costs for individuals and sometimes, entire communities. Chronic loss is also common in minority and marginalized communities; e.g., the case of African American farmers in the southern United States. In addition to annual losses resulting from falling crop prices, drought, and growing competition from larger factory farms, many African American farmers have also had to contend with financial losses associated with discrimination by the United States Department of Agriculture in terms of access to much-needed federal assistance. The overall result of these losses has been a 98% decline in the number of farms owned by African Americans (vs. a 60% decline in the number of farms operated by white owners) since 1920.

Research in the lab focuses on the effect of chronic on decisions with uncertain outcomes that are made in domains where losses are incurred; we are also interested in the “spillover effect” of these losses with respect to how they may influence decisions in other, unrelated contextual domains.
See:

Rivers, L., and J. L. Arvai. 2007. Win some, lose some: The effect of chronic losses on decision making under risk. Journal of Risk Research, 10: 1085-1099. [DOWNLOAD]

Rivers, L. 2006. A post-Katrina call to action for the risk analysis community. Risk Analysis 26: 1-2. [DOWNLOAD]