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Policy Bundling to Overcome Loss Aversion: A Method for Improving Legislative Outcomes

By Katherine L. Milkman, Mary Carol Mazza, Lisa L. Shu, Chia-Jung Tsay and Max H. Bazerman

Abstract

Policies that would create net benefits for society but would also involve costs frequently lack the necessary support to be enacted because losses loom larger than gains psychologically. To reduce the harmful consequence of loss aversion, we propose a new type of policy bundling technique in which related bills that have both costs and benefits are combined. In our first laboratory study, we confirm across a set of four legislative domains that this bundling technique increases support for bills that have both costs and benefits. We also show in a second study that this effect stems from a diminished focus on losses and heightened focus on gains when policies are evaluated in bundled form.loss aversion; policy bundling; behavioral economics

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