Prospect theory and public service outcomes: Examining risk preferences in relation to public sector reforms

Prospect theory has been widely acknowledged in the social sciences as a frame for understanding how people deal with uncertainty. Yet, little is known about whether key expectations from prospect theory also hold in a public service setting. In this article, I draw on prospect theory to examine under what conditions citizens prefer uncertain - but potentially advantageous - reforms to reforms with more certain outcomes. A population-based survey experiment with the participation of 1,395 Danish citizens and two consecutive experiments with 1,680 US MTurkers produced a consistent pattern across contexts: citizens to a large extent prefer certain to risky reforms and are more willing to take risks if reforms are associated with gains rather than losses. The latter finding is in opposition to expectations and suggests that the particularities of the public sector should be taken into account when applying insights from prospect theory to this sector.