Loss Aversion.
In sports, on a game show, or just on the job, what causes people to choke when the stakes are high? A new study by researchers at the California Institute of Technology (Caltech) suggests that when there are high financial incentives to succeed, people can become so afraid of losing their potentially lucrative reward that their performance suffers.
It is a somewhat unexpected conclusion. After all, you would think that the more people are paid, the harder they will work, and the better they will do their jobs — until they reach the limits of their skills. That notion tends to hold true when the stakes are low, says Vikram Chib, a postdoctoral scholar at Caltech and lead author on a paper published in the May 10 issue of the journal Neuron. Previous research, however, has shown that if you pay people too much, their performance actually declines.
Some experts have attributed this decline to too much motivation: they think that, faced with the prospect of earning an extra chunk of cash, you might get so excited that you will fail to do the task properly. But now, after looking at brain-scan data of volunteers performing a specific motor task, the Caltech team says that what actually happens is that you become worried about losing your potential prize. The researchers also found that the more someone is afraid of loss, the worse they perform.
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