Behavioral Causality Orientations and Investment Decisions Following Negative Feedback

Individual differences in the locus of causality for behavior are seldom considered in tests of regulatory events (e. g., feedback and coercion). This study examined the relationship between Deci and Ryan's (1985a) causality orientation constructs and decision makers' behavioral intention responses to negative feedback following an initial decision. A laboratory experiment involved 98 Singaporean business students in a commitment escalation context in which sunk costs for an initial investment failure could be recovered by reinvesting in that prospect in preference to selecting an alternative that had previously performed better. Consistent with various theories of the escalation effect, in which subjects responsible for prior negative outcomes tend to reinvest in the initially chosen project, control orientation was positively associated with reinvestment and impersonal orientation was negatively related to reinvestment. The influence of personality on reinvestment/withdrawal behavior was moderated by the experimental condition of responsibility for the initial sunk cost. We discuss the implications of these findings for the construct validity of the causality orientations, the role of personality in commitment escalation, and the important role that individual differences in perceptions of regulatory events may play in determining behavior.     

Escalation of commitment with transparent future outcomes

A frequent case of irrational decision making is the tendency to escalate commitment to a chosen course of action after unsuccessful prior investments of money, effort, or time (sunk costs). In previous research it is argued that escalation does not occur when future outcomes and alternative investments are transparent. Inconsistent with this argument, in an experiment in which undergraduates were presented fictitious investment problems with sunk costs, escalation was demonstrated when full information was given about investment alternatives and estimates of future returns. Thus, it is indicated that people may escalate despite knowing that it will not make them economically better off. A more comprehensive understanding of escalation requires disentangling people's noneconomic reasons for escalation.     

Judging risk behaviour and risk preference: The role of the evaluative connotation of risk terms

Two experiments investigate the impact of the evaluative connotation of risk terms on the judgment of risk behaviour and on risk preference. In the first experiment we focus on (1) the evaluation congruence of the risk terms with a general risk norm and (2) with subjects' individual risk preference, and its effects on the extremity of judgments of risk behaviour. In the second experiment we address (3) the effects of evaluative connotation of risk terms on risk preference. In the first experiment subjects were presented with four decision problems, each with a risky and a cautious decision option, and were required to judge options. Results showed that the judged discrepancy between the risky and cautious option was larger on scales which were evaluatively congruent with the general risk norm for that specific decision problem or with subjects' individual preference. More specificly, in decision problems for which there was considerable consensus about the risk-norm judgments were more extreme on scales which were congruent with the risk norm, in those problems lacking a clear-cut risk-norm judgments were more extreme on scales congruent with subjects' individual risk preference. In the second experiment we studied the reverse relation between the evaluative connotation of risk terms and risk preference. This experiment demonstrates that using evaluatively biased risk terms can affect risk preference. Using terms which imply a positive evaluation of risk-taking and a negative evaluation of risk avoidance led to increased risk preference, and vice versa. Results are discussed in the context of accentuation theory.     

Impact of decision goal on escalation

This research investigates the sunk-cost effect or escalation defined as the irrational tendency to choose to continue to invest money, time, or effort following unsuccessful investments. Building on previous research demonstrating a loss-sensitivity principle in sequential decision making, the hypothesis was proposed that a loss-minimization goal would lead to stronger effects of sunk outcomes (prior gains and losses) than would a gain-maximizing goal. The hypothesis was investigated in three experiments with undergraduates responding to investment decision scenarios. Although the tendency to continue investments was always larger for gain-maximizing than for loss-minimizing goal instructions, the sunk-outcome effect was stronger in the former case. However, when the decisions were personal and concerned lower stakes rather than business investments involving large amounts of money, the expected stronger effect of sunk outcomes was found for loss-minimizing goal instructions. Another finding was that the expected value was never ignored, thus suggesting that future research should focus on the joint effects of the expected value and sunk outcomes.     

自我框架、风险认知和风险选择

对行为决策中“框架效应”(Framing Effect)的研究进行了拓展：探讨了自我框架对风险决策的影响及其机制。面对运用图示方法表示的管理,健康,及投资方面的风险决策问题,参与者自主地选择对方案的描述（自我框架）。研究有四个主要发现：1）自我框架对风险选择的效应部分显著,而且对风险选择的影响方向因情境的不同而不同;2）机会威胁认知是自我框架效应的一个中介变量;3）自我框架在情绪语气上的差异对风险决策有显著影响：决策者对一个备选方案（确定性或风险性方案）相对于另一个备选方案的自我描述的情绪语气越积极正面,这个方案被选择的可能性越大;4）决策者的机会-威胁认知是这一自我框架效应的部分中介变量。也就是说,对备选方案的自我描述语气作为一种对决策信息的编码影响了风险（机会和威胁）认知,进而影响决策者的风险偏好和选择     

The effects of decision framing on choice of risky vs certain options

Tversky and Kahneman (1981, Science, 211, 453–458) reported that the choice between two decision alternatives of equal expected value, differing only in the degree of risk, was significantly influenced by the “framing” of the alternative decision outcomes. When alternative outcomes were phrased “positively” in terms of lives saved, subjects preferred the risk-averse alternative. When outcomes were phrased “negatively” in terms of lives lost, the risk-seeking option was preferred. Experiment 1 investigated the robustness of the framing effect and its remediation by formal training. Forty-five MBA students responded to a decision problem before and after training in decision theory. Results differed from those published by Tversky and Kahneman (1981) in two respects. First, although results in the positive framing condition were similar to Tversky and Kahneman's results, no preference for the risky option in the negative framing condition was observed. Consequently, no framing effect was found even on the pretest. Second, many students reported being indifferent to the two options. No significant changes occurred after training. Experiment 2 replicated these results on a nonbusiness sample. These findings suggest that (a) unidentified factors affect whether a framing effect is observed, and (b) the bias known as the framing effect may not be as robust as has been believed.     

The dynamics of choice in a changing world: Effects of full and partial feedback

We explored the dynamics of choice behavior while the values of the options changed, unannounced, several times. In particular, choice dynamics were compared when the outcome values of all available options were known (full feedback) and when the outcome value of only the chosen option was known (partial feedback). The frequency of change, the values of the options, and the difference between them were also manipulated. In an experiment with N = 427, we found that the patterns of choices were different for the two levels of feedback. Whereas behavior in the full-feedback condition showed a tendency to switch choices following a missed opportunity—replicating previous findings—the behavior in the partial-feedback condition was different. It was sensitive to the outcome value of the chosen option in comparison to some memory of the last-experienced outcome value of the unchosen option. However, the comparison of these two values influenced choice behavior only when the outcome of the currently chosen option was satisfactory and the last outcome of the unchosen one was not. As expected, the other manipulated variables (change frequency, the options’ values, and the difference between them) had no effect on the dynamics of behavior.     

Reinvestment: Examining convergent,discriminant, and criterion validity using psychometric and behavioral measures

Given scarce external validity available to date concerning the reinvestment construct, the aim of this four-study research project was to further explore the validity of the Movement-Specific Reinvestment Scale and the Decision-Specific Reinvestment Scale, using psychometric and behavioral measures. Study 1 showed that deliberative participants had a higher reinvestment tendency than intuitive participants. Study 2 showed that reinvestment was linked to self-consciousness, rumination, perfectionism, and had satisfactory test–retest reliability. Moreover, it provided some potential insights on the development of reinvestment due to parental criticisms. Study 3 indicated that high decision reinvestors performed worse than their low decision reinvestor counterparts in a visual search task under pressure. Study 4 showed that older participants had a lower reinvestment score, and that reinvestment was associated with higher motor imagery ability, challenging the idea that reinvestment can only be seen as detrimental to performance.     

风险偏好、信息完整性对职业决策信息加工的影响

本研究旨在探讨个体风险偏好如何影响信息加工过程;同时呈现信息的完整性是否影响个体信息加工过程。以31名正在求职的大学生为被试,探讨了他们在信息板上进行职业决策的信息加工过程。结果显示：(1) 低风险偏好者比高风险偏好者更关注与概率相关的线索;(2) 当信息不完整时,个体在决策中增加了对概率相关线索的关注;(3) 信息完整性对个体决策信息加工过程并未产生显著的影响。     

Outcome Knowledge,Regret, and Omission Bias

Subjects made or evaluated decisions in hypothetical scenarios. We manipulated knowledge about the outcome and act vs omission in four cases. In case 1 (production processes), acts (changing the process) were considered better than omissions when the decision maker did not know the outcome or knew that it was better than the status quo. Acts were considered worse than omissions once the decision maker learned that the foregone option would have led to an even better outcome. In case 2 (medical treatment), act vs omission again interacted with gain vs loss (relative to the status quo) unless the outcome of the foregone option was known, in which case act vs omission interacted with better vs worse (of the two options). In case 3 (fetal testing), subjects tolerated less risk of miscarriage when a potential for regret was present (because the test with the risk of miscarriage, although better, might miss disorders that another test would detect). This effect was greater for actions than omissions. In case 4 (vaccination), subjects showed less tolerance of vaccine risk when the decision maker would know about the outcome of vaccination or nonvaccination. Thus, the bias toward omission (not vaccinating) is greater when potential regret is present, and potential regret is greater when knowledge of outcomes is expected.     

Framing Effects: Dynamics and Task Domains

The author examines the mechanisms and dynamics of framing effects in risky choices across three distinct task domains (i.e., life–death, public property, and personal money). The choice outcomes of the problems presented in each of the three task domains had a binary structure of a sure thing vs a gamble of equal expected value; the outcomes differed in their framing conditions and the expected values, raging from 6000, 600, 60, to 6, numerically. It was hypothesized that subjects would become more risk seeking, if the sure outcome was below their aspiration level (the minimum requirement). As predicted, more subjects preferred the gamble when facing the life–death choice problems than facing the counterpart problems presented in the other two task domains. Subjects’ risk preference varied categorically along the group size dimension in the life–death domain but changed more linearly over the expected value dimension in the monetary domain. Framing effects were observed in 7 of 13 pairs of problems, showing a positive frame–risk aversion and negative frame–risk seeking relationship. In addition, two types of framing effects were theoretically defined and empirically identified. Abidirectional framing effectinvolves a reversal in risk preference, and occurs when a decision maker's risk preference is ambiguous or weak. Four bidirectional effects were observed; in each case a majority of subjects preferred the sure outcome under a positive frame but the gamble under a negative frame. In contrast, aunidirectional framing effectrefers to a preference shift due to the framing of choice outcomes: A majority of subjects preferred one choice outcome (either the sure thing or the gamble) under both framing conditions, with positive frame augmented the preference for the sure thing and negative frame augmented the preference for the gamble. These findings revealed some dynamic regularities of framing effects and posed implications for developing predictive and testable models of human decision making.     

Biased information processing in the escalation paradigm: information search and information evaluation as potential mediators of escalating commitment

Escalation of commitment denotes decision makers' increased reinvestment of resources in a losing course of action. Despite the relevance of this topic, little is known about how information is processed in escalation situations, that is, whether decision makers who receive negative outcome feedback on their initial decision search for and/or process information biasedly and whether these biases contribute to escalating commitment. Contrary to a widely cited study by E. J. Conlon and J. M. Parks (1987), in 3 experiments, the authors found that biases do not occur on the level of information search. Neither in a direct replication and extension of the original study with largely increased test power (Experiment 1) nor under methodologically improved conditions (Experiments 2 and 3) did decision makers responsible for failure differ from nonresponsible decision makers with regards to information search, and no selective search for information supporting the initial decision or voting for further reinvestment was observed. However, Experiments 3 and 4 show that the evaluation of the previously sought information is biased among participants who were responsible for initiating the course of action. Mediation analyses show that this evaluation bias in favor of reinvestment partially mediated the responsibility effect on escalation of commitment.     

De‐escalation after repeated negative feedback: emergent expectations of failure

Research on willingness to make marginal investments (e.g., the escalation and sunk cost literatures) has often focused on project completion decisions, such as the “radar‐blank plane.” This paper discusses a fundamentally different type of marginal investment decision, that of couples deciding whether to continue infertility treatment in the face of repeated failures. Two experiments based on this context show that when people face multiple independent chances to achieve a valued goal but are unsure about chances of success, premature quitting or “de‐escalation” is the norm. Repeated negative feedback appears to induce individuals to see each successive failure as more and more diagnostic. As a result, even a short series of failed attempts evokes beliefs that future attempts will also fail. These emergent expectations of failure, generated by causal attribution processes, associative learning, and/or discounting of ambiguous information, appear very compelling and induce people to forgo profitable marginal investments. Copyright © 2004 John Wiley & Sons, Ltd.     

An account of human “impulsivity” on self-control tasks

Three experiments examined the effects of economic constraint (time restriction—trials restriction) on adult humans' performance on concurrent chained schedules of reinforcement in which terminal links differed both in reward size and pre-reward delay levels. In the first, terminal links offered a long delay (20, 30, 40, 50 sec) followed by 2 points, or a short delay (10 sec) followed by 1 point. Initial links consisted of the same variable interval schedules for each alternative. Subjects showed a conditional sensitivity to increases in delay. Under a time constraint, there was an increasing preference for the smaller reward as the delay to the larger reward was increased, whereas under a trials constraint subjects were totally insensitive to such changes. In the second experiment, this finding was replicated using long and short periods of video game playing as large and small rewards. In the third experiment terminal link parameters remained constant (2 points after 15 sec, or 1 point immediately), but initial link parameters were manipulated (either VI 1-sec, 8-sec, or 20-sec) so that the higher relative rate of reward shifted from being associated with the small reward to being associated with the large reward. Again subjects chose differently under the two constraints. Subjects under the time constraint exhibited a preference for the small reward at all levels of initial link, but under the trials constraint subjects preferred the large reward. Subjects in the time constraint condition thus exhibited a maladaptive insensitivity to changes in the initial link duration. These findings are interpreted as supporting a miscalculation rather than a discounting interpretation of human performance on “self-control” tasks.     

Escalating Commitment in Individual and Group Decision Making: A Prospect Theory Approach

An explanation for escalating commitment based on prospect theory (Kahneman & Tversky, 1979) is extended to the group level of analysis. Hypotheses concerning the likelihood and degree of escalating commitment of individuals and groups were derived from the model and tested using six investment decision scenarios. Subjects responded to decision dilemmas in which substantial funds have been invested in a failing course of action. Subsequent investment would likely exacerbate although it could potentially reverse the situation. Consistent with hypotheses derived from the model, escalating commitment occurred in both individual and group decision making. Group decision making amplified trends apparent at the individual level in terms of the frequency with which escalation occurred and its severity. Although the results are consistent with a prospect-theory-based explanation of escalating commitment at two levels of analysis, support for the self-justification approach was also found. Motives for self-justification, however, do not appear to be a necessary condition for escalation to occur.     

The Effect of Decision Strategy on Deciding to Defer Choice

Recent research has examined consumer decision making when the option of not choosing any of the alternatives is also provided. The findings from this research suggest that the decision to defer choice is sensitive to the uncertainty of choosing the most preferred option from the set of alternatives provided. Building on this research, the author tests whether the decision to defer choice is also influenced by task variables that influence decision uncertainty. In the first experiment, this proposition is tested for choice problems in which information on three relatively equally attractive alternatives is presented either sequentially or simultaneously. As predicted, the preference for the defer-choice option was greater when the three alternatives were presented simultaneously. A second study forced subjects into using one of four decision strategies in order to choose between two non-dominated alternatives. The preference for the no-choice option was found to be higher when the rule required explicit attribute tradeoffs and lower when it simplified choice. These results suggest that choice uncertainty is influenced by the decision strategy used to determine the preference among alternatives. We conclude with a discussion of the implications of the results for marketers' communication strategies.     

风险偏爱特征的实验研究

本研究采用等级排序的方法 ,60名被试分别在大、小两种恒定的期望值条件下 ,对不同风险来源和不同风险水平的抽彩方案进行偏爱排序 ,以此来检验组合理论有关风险偏爱模式的假设。结果发现 :( 1 )被试的风险偏爱模式以单峰模式为主 ;( 2 )期望值的大小和不同的风险来源对偏爱模式没有显著影响。通过与美国研究者的结果比较发现 ,中美被试对于固定收益、中等风险和高风险评为最不偏爱的数量上存在显著差异。     

Escalation and De-escalation of Commitment in Response to Sunk Costs: The Role of Budgeting in Mental Accounting

Research has traditionally assumed that people increase investment (or "escalate commitment") in response to previous investments (sunk costs). This paper presents several demonstrations which show that people will incorrectly de-escalate investment in response to sunk costs. I propose that people set mental budgets to control their resource expenditures: they set a budget for a class of expenses and track their investments against their budget. A lab study with real monetary incentives shows support for de-escalation and supports a specific rule for how people set budgets - based on the breakeven of total costs and total benefits. The budgeting process suggests that people are only likely to escalate commitment when they fail to set a budget or when expenses are difficult to track. The later part of the paper organizes the previous literature on escalation around these processes and provides additional experiments to illustrate each point. For example, I argue that previous demonstrations that have shown errors of escalation exclusively involve "incidental" investments that are difficult to track. A study in the current paper shows that people are more willing to invest time than money to salvage a monetary sunk cost and more willing to invest money than time to salvage a sunk cost of time, even when the time and money investments are of equal value. The paper concludes by discussing the rationality of escalation and de-escalation.