Goal-induced risktaking in negotiation and decision making

Three experiments test whether specific, challenging goals increase risk taking. We propose that goals serve as reference points, creating a region of perceived losses for outcomes below a goal (Kahneman & Tversky, 1979; Tversky & Kahneman, 1992). According to the Prospect Theory value function, decision makers become more risk seeking in the domain of losses. In all three experiments we compared a "do your best" condition with a "specific, challenging goal" condition. The goal condition consistently increased risky behavior in both negotiation and decision making tasks. The discussion considers how goals influence expectations, strategy choice, and unethical behavior.

Duke Scholars

Author Richard P. Larrick Fuqua School of Business