Avoiding negative vs. achieving positive outcomes in hard and prosperous economic times Kobe Millet a,⇑ , Lien Lamey b,c , Bram Van den Bergh d a Faculty of Economics and Business Administration, VU University, Amsterdam, The Netherlands b Department of Business Studies, Lessius University College, Belgium c Faculty of Business and Economics, KULeuven, Belgium d Rotterdam School of Management, Erasmus University, The Netherlands article info Article history: Received 21 August 2010 Accepted 7 November 2011 Available online 6 December 2011 Accepted by Dr. Julie Irwin Keywords: Business cycle Gains Losses Approach Avoidance Motivations Risk Consumption abstract Three studies suggest that business cycle fluctuations trigger distinct motivational orientations that selectively affect economic judgment and decision making. Economic contractions induce avoidance motivation and affect negative economic sentiment, but leave approach motivation and positive eco- nomic sentiment unaffected. In contrast, economic expansions induce approach motivation and positive economic sentiment, but do not affect avoidance motivation or negative economic sentiment (study 1). Moreover, economic contractions induce risk aversion for negative outcomes, but not for positive out- comes, while economic expansions instigate risk seeking for positive outcomes, but not for negative out- comes (study 2). A time-series study based on consumer spending over eight decades mirrors the findings of the experimental studies: The consumption of products associated with avoiding negative outcomes increases during economic contractions, but not during expansions. In contrast, the consumption of prod- ucts associated with achieving positive outcomes increases in expansions, but is unaffected by contrac- tions (study 3). Ó 2011 Elsevier Inc. All rights reserved. Introduction The economy generally alternates between hard and prosper- ous economic times. These business cycle fluctuations not only determine the economic system itself, but influence the individu- als in the economic system as well. For example, the relationship between business cycle fluctuations and health effects is well established in medical research literature: There are clear relation- ships between economic contractions and increased risk of poor mental and physical health, increased rates of mortality, a higher prevalence of risky health behaviors, and short term rises in pre- mature deaths from intentional violence, suicide and homicides (e.g. Brenner, 1979; Dooley, Fielding, & Levi, 1996; Falagas, Vouloumanou, Mavros, & Karageorgopoulos, 2009; Linn, Sandifer, & Stein, 1985; Stuckler, Basu, Suhrcke, Coutts, & McKee, 2009; see however Ruhm, 2000). The profound impact of business cycle fluctuations is also evident in consumption decisions of individu- als. For example, unemployment or economic contractions lead to an increase in unhealthy behaviors such as alcohol and tobacco consumption (Dee, 2001; Lee, Crombie, Smith, & Tunstall-Pedoe, 1991), but more ‘adaptive’ consumption decisions have been ob- served as well. During economic downturns, consumers trade big ‘named’ brands in for lower-priced private labels (Lamey, Deleersnyder, Dekimpe, & Steenkamp, 2007) and the acquisition of expensive durables is postponed when consumers are con- fronted with unfavourable economic times (Deleersnyder, Dekimpe, Sarvary, & Parker, 2004). The present research aims to investigate the impact of business cycle fluctuations on economic sentiments, decisions under risk and consumption patterns. We will provide evidence for the idea that business cycle fluctuations trigger distinct motivational orien- tations that selectively affect consumers’ responses and actions. More specifically, we will argue that an economic contraction in- duces a motivation towards avoiding negative outcomes (i.e., financial losses), while an economic expansion motivates individu- als to achieve positive outcomes (i.e., financial gains). Although, ideally, achieving financial gains and avoiding financial losses are considered all together, we suggest that economic downturns will motivate individuals to avoid losses, but not necessarily to achieve gains, while economic expansions will motivate individuals to achieve gains, but not necessarily to avoid losses. A major methodological challenge in research on business cycle effects is disentangling cause from effect. For example, scholars 0749-5978/$ - see front matter Ó 2011 Elsevier Inc. All rights reserved. doi:10.1016/j.obhdp.2011.11.008 ⇑ Corresponding author. Address: Department of Marketing, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands. Fax: +31 20 598 9870. E-mail addresses: kobe.millet@vu.nl (K. Millet), lien.lamey@lessius.eu (L. Lamey), bbergh@rsm.nl (B. Van den Bergh). Organizational Behavior and Human Decision Processes 117 (2012) 275–284 Contents lists available at SciVerse ScienceDirect Organizational Behavior and Human Decision Processes journal homepage: www.elsevier.com/locate/obhdp