Humans Love Silver Linings

When faced with a lot of bad news and a little good news, people would prefer to see the information presented separately, according to a new study in Management Science.

For example, investors who lost $100 in one stock but gained $5 in another stock feel better seeing those numbers separately, rather than being shown an aggregate loss of $95. And in fact, this is already well known—explaining one reason why retailers like rebates rather than just reducing the price of something. (We not-so-secretly believe that the other reason retailers love rebates is that they’re hoping you’ll lose the rebate form.)

What does this have to do with jobs? In this new study, the researchers presented subjects with a hypothetical scenario: You’ve just lost your job and are offered two choices of a new job. Both are identical except that in one, your summer vacation days will be reduced by four, offset by three extra vacation days in the winter; in the other, you lose one summer vacation day. Which would you choose?

Each results in a loss of one vacation day per year but the information is presented differently. (The researchers also ran some numbers to account for whether people just preferred summer vacations.) Turns out that people prefer getting “the good news and the bad news” split up (as in the first scenario) when the loss is perceived to be greater (for a given gain), when the gain is greater (for a given loss), or the more risk-averse people are.

But what this means practically, we think: if you have bad and good news to deliver, bundle them together but treat them as separate.