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The third-person effect phenomenon, also called the third-person perception, was first conceptualized in 1983 by sociologist W. P. Davison. The third-person effect is the idea that individuals tend to believe that others are more affected by media messages than they themselves are. While the theory applies to many types of media messages, it can be particularly applicable to some messages that are important in health communication and other forms of risk communication. For example, an individual might assume that advertising about a new pharmaceutical product or something harmful like tobacco has strong effects on others but not on themselves.

Davison had been involved in psychological operations during World War II, and the third-person hypothesis appears to have come out of situations he encountered during that time. Davison gives one example of propaganda leaflets that were dropped by the Japanese on an island occupied by U.S. forces. The message was designed to disrupt the soldiers. While the soldiers were unaffected by the messages (they knew propaganda when they saw it), the island commanders withdrew some soldiers out of fear the messages would affect the soldiers. Davison said the commanders reacted because of a perception that the propaganda would cause soldiers to desert their posts. He called this perception—the belief that other people are affected by a message more than you are—the third-person effect because it involved people making a judgment regarding others, or third persons.

The third-person effect concept can be illustrated by asking a group of people to watch or read a media message (a news piece, an advertisement, or other item). After viewing the message, the group is asked to assess on a five-point scale the impact the item had on themselves and, separately, to assess the impact they believe the message has had on others who have seen it. Third-person effect research reveals that usually most people will rate the effect of the message as higher on others. This tendency has been well documented, although it has yet to be entirely explained. The effect has great implications for society.

The third-person effect is tested in most experiments using the aforementioned method, and then the results are reduced to a single number for each pair of questions. This is called the third-person effect score. The third-person effect score is derived by subtracting the result of the first question from the result of the second question. If the resulting number is positive, there is a third-person effect. This is because a positive number shows a person indicated the message impacted others more than themselves, the effect that occurs most often. Under some circumstances, a negative number will occur. This is called a reverse-third-person effect or a first-person effect. A third-person effect score of zero indicates a person believes others are impacted to the same degree as they are and is sometimes called the looking glass phenomenon or consensus effect.

The third-person effect was hypothesized by Davison to have potentially devastating effects on society. One of Davison's examples focused on risk aversion. He suggested that individuals with investments in the stock market might react to rumors based on the third-person effect. Individuals may realize that rumors in the media are false, but assume other investors will be much more influenced by the media reports and begin to divest of their stocks. The individual affected by the third-person effect may therefore withdraw his or her own stocks to preempt a stock plunge they believe other, more gullible investors will cause. Ironically, this may then cause the stock value to decline even when the individuals removing their investments believe the rumors to be false. In this case, the third-person effect causes a self-fulfilling prophecy in the stock market.

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