Economics

The Silver Lining Effect Is Why Saying "I Have Good News And Bad News" Is Best

News: The Curiosity Podcast is here! Subscribe on iTunes, Stitcher, Google Play Music, SoundCloud and RSS.

When you've got positive and negative information for someone, do you deliver it all at once or do you rely on the old standby, "I have some good news and some bad news"? We recommend going with the latter. According to research, that time-tested phrase really does make bad news a little easier to handle.

Related: The Framing Effect Shows How Word Choice Affects Your Decisions

Advertisement

Good News About Bad News

In 1985, economist Richard Thaler performed an experiment where he asked Cornell University students questions like this: "Mr. A's car was damaged in a parking lot. He had to spend $200 to repair the damage. The same day the car was damaged he won $25 in the office football pool. Mr. B's car was damaged in a parking lot. He had to spend $175 to repair the damage. Who was more upset?" Even though both men lost the same amount of money, the majority of students (72 percent) thought Mr. B was more upset. The students' responses lined up with what psychologists Amos Tversky and Daniel Kahneman called "prospect theory": the idea that people don't weigh alternatives equally, and instead make decisions based on their fear of loss. Because Mr. A had a gain with his loss and Mr. B didn't, the students perceived Mr. A's situation as better than Mr. B.

Related: Loss Aversion Says That The Pain Of Loss Is Stronger Than The Joy Of Gain

Thaler's study was important, but it only went so far. In 2008, researchers Peter Jarnebrant, Olivier Toubia, and Eric Johnson built upon Thaler's work with a study published in Management Science that looked at exactly how this so called "silver-lining effect" happens. According to a press release, "The authors determined that the smaller the positive amount [...] and the larger the negative one [...] the more people prefer that the information be presented in separate sections rather than summed together." That is, finding out that you won $5 while losing $20 might not mean as much to you as finding out that you won $5 while losing $200.

How This Plays In The Real World

It might not surprise you that the idea of giving good news with bad news also has an impact on, well, the news. A 2016 study found that media audiences are happier when a story about a negative event highlights something positive that came out of it. That's a good lesson for news outlets who want to balance the important job of reporting negative news with keeping their readers happy.

Related: The Internet's Filter Bubble Isn't As Strong As You Think

Likewise, the 2008 Management Science study has implications for investing and sales, too. "In finance, for example, a mutual fund posting a quarterly loss would be better perceived by investors if the accompanying information pointed out the portions of the portfolio that posted a gain. In a retailing example, automobile manufacturers and dealers will be better appreciated by potential customers if they price a car at $20,000 with a $500 rebate than if they price the same car at $19,500." It's just like Mary Poppins's sage advice: a spoonful of sugar helps the medicine go down.

Is there something you're curious about? Send us a note or email us at editors (at) curiosity.com. And follow Curiosity on Facebook, Instagram and Twitter.

Love getting smarter? Sign up to our newsletter and get our best content in your inbox!

Watch And Learn: Our Favorite Content About How Words Affect Us

How Framing Changes Our Decisions

Would You Take This Bet?

Share the knowledge!

Behavioral Economics

Advertisement