Scholten, M., Read, D., & Stewart, N. (2019). The framing of nothing and the psychology of choice. Journal of Risk and Uncertainty, 59, 125-149. doi: 10.1007/s11166-019-09313-5

Zero outcomes are inconsequential in most models of choice. However, when disclosing zero outcomes they must be designated. It has been shown that a gamble is judged to be more attractive when its zero outcome is designated as "losing $0" rather than "winning $0," an instance of what we refer to as the mutable-zero effect. Drawing on norm theory, we argue that "losing $0" or "paying $0" evokes counterfactual losses, with which the zero outcome compares favorably (a good zero), and thus acquires positive value, whereas "winning $0" or "receiving $0" evokes counterfactual gains, with which the zero outcome compares unfavorably (a bad zero), and thus acquires negative value. Moreover, we propose that the acquired value of zero outcomes operates just as the intrinsic value of nonzero outcomes in the course of decision making. We derive testable implications from prospect theory for mutable-zero effects in risky choice, and from the double-entry mental accounting model for mutable-zero effects in intertemporal choice. The testable implications are consistently confirmed. We conclude that prevalent theories of choice can explain how decisions are influenced by mutable zeroes, on the shared understanding that nothing can have value, just like everything else.

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