Reflection Effect


Health Economics

  • Reflection effects in experimental economics and psychology involve gambles whose outcomes are opposite in sign, though of the same size, and they can be a problem in identifying people's ' rational ' preferences. Compare two choices, one between a certain gain of $20 or a one-third chance of $60 and the other between a certain loss of $20 and a one-third chance of losing $60. Most people choose the certain gain in the first choice but the one-third chance of loss in the second. The effect is predicted by prospect theory as a consequence of the S shape of the value function.