Extreme Outcomes Sway Risky Decisions from Experience

Whether buying stocks or playing the slots, people making real‐world risky decisions often rely on their experiences with the risks and rewards. These decisions, however, do not occur in isolation but are embedded in a rich context of other decisions, outcomes, and experiences. In this paper, we systematically evaluate how the local context of other rewarding outcomes alters risk preferences. Through a series of four experiments on decisions from experience, we provide evidence for an extreme‐outcome rule, whereby people overweight the most extreme outcomes (highest and lowest) in a given context. As a result, people should be more risk seeking for gains than losses, even with equally likely outcomes. Across the experiments, the decision context was varied so that the same outcomes served as the high extreme, low extreme, or neither. As predicted, people were more risk seeking for relative gains, but only when the risky option potentially led to the high‐extreme outcome. Similarly, people were more risk averse for relative losses, but only when the risky option potentially led to the low‐extreme outcome. We conclude that in risky decisions from experience, the biggest wins and the biggest losses seem to matter more than they should. Copyright © 2013 John Wiley & Sons, Ltd.     

Dissociable effects of basolateral amygdala lesions on decision making biases in rats when loss or gain is emphasized

Individuals switch from risk seeking to risk aversion when mathematically identical options are described in terms of loss versus gains, as exemplified in the reflection and framing effects. Determining the neurobiology underlying such cognitive biases could inform our understanding of decision making in health and disease. Although reports vary, data using human subjects have implicated the amygdala in such biases. Animal models enable more detailed investigation of neurobiological mechanisms. We therefore tested whether basolateral amygdala (BLA) lesions would affect risk preference for gains or losses in rats. Choices in both paradigms were always between options of equal expected value—a guaranteed outcome, or the 50:50 chance of double or nothing. In the loss-chasing task, most rats exhibited strong risk seeking preferences, gambling at the risk of incurring double the penalty, regardless of the size of the guaranteed loss. In the betting task, the majority of animals were equivocal in their choice, irrespective of bet size; however, a wager-sensitive subgroup progressively shifted away from the uncertain option as the bet size increased, which is reminiscent of risk aversion. BLA lesions increased preference for the smaller guaranteed loss in the loss-chasing task, without affecting choice on the betting task, which is indicative of reduced risk seeking for losses, but intact risk aversion for gains. These data support the hypothesis that the amygdala plays a more prominent role in choice biases related to losses. Given the importance of the amygdala in representing negative affect, the aversive emotional reaction to loss, rather than aberrant estimations of probability or loss magnitude, may underlie risk seeking for losses.     

Individual differences in need for cognition and decision making in the Iowa Gambling Task

Differences in decision making between individuals differing in Need for Cognition (NFC) are examined using the Iowa Gambling Task (IGT). Previous work using normative one time decisions suggests that individual low in NFC process gains and losses differently than those high in NFC and are more susceptible to decision biases. The IGT is a popular laboratory task that involves making risky decisions from experience involving both gains and losses. In the first experiment, low NFC participants performed significantly worse than the high NFC participants. A second experiment designed to examine the nature of these differences provides evidence that low NFC participants place more importance on gains as opposed to losses when performing the IGT. Results are discussed in light of previous work suggesting that low NFC participants place more importance on losses in mixed outcome decisions.     

任务框架、损益值大小对自恋者风险偏好的影响

以234名大学生为被试,探讨了任务框架、损益值大小对显性/隐性自恋者风险偏好的影响。结果表明：(1)框架效应较稳定的出现在中等风险水平情境下,且在大损益值条件下更易出现。(2)在获益框架下,被试为小金额决策更冒险,在损失框架下,则为大金额决策更冒险。(3)在损失框架下,高显性自恋者比低显性自恋者更为冒险,在获益框架下,高隐性自恋者比低隐性自恋者更为保守;高隐性自恋者的风险偏好受到任务框架和损益值大小的共同影响。     

Uncertainty Avoidance Influences Choices for Potential Gains but not Losses

Uncertainty of outcomes is a primary dimension underlying human judgment and decision making, and is a defining feature of risk. Even though uncertainty almost always exists in decision making contexts, individuals and cultures vary in their preference for avoiding uncertainty. This study examines how uncertainty avoidance influences judgments involving uncertain and risky alternatives. Participants were presented with problems that involve potential gains or losses and contain options reflecting uncertain or certain outcomes. Greater uncertainty avoidance predicted choices for uncertain outcomes that involved gains, which tend to promote risk aversion, but not for uncertain outcomes that led to losses, which tend to promote risk seeking. These results demonstrate that culturally-relevant dispositions such as uncertain avoidance can have complex effects on judgment.     

Age Differences in Risk: Perceptions,Intentions and Domains

Although it is commonly assumed that older people are more cautious and risk averse than their younger counterparts, the research on age differences in risk taking is mixed. While some research has found that older adults are less risk seeking, other research has found the opposite or no differences. One explanation is that age differences vary across risk domains. In two studies, we surveyed three adult age groups ranging in age from 18 to 83 on their risk perceptions and intentions of risky behaviors across several domains. Our studies showed that compared with young adults, older adults tend to see more risk in behaviors in health and ethical domains but less risk in behaviors from the social domain. A similar pattern occurred for participants' intentions of engaging in the risky behaviors. Older adults rated risky behaviors from health and ethical domains as less enjoyable and less likely to produce gains than young adults, whereas they rated risky behaviors from the social domain as more enjoyable, less unpleasant, and less likely to produce losses than young adults. These results suggest that age differences in risk preferences may vary across domains and may result from differing motivations. Copyright © 2015 John Wiley & Sons, Ltd.     

Good or Bad,We Want it Now: Fixed‐cost Present Bias for Gains and Losses Explains Magnitude Asymmetries in Intertemporal Choice

Intertemporal tradeoffs are ubiquitous in decision making, yet preferences for current versus future losses are rarely explored in empirical research. Whereas rational‐economic theory posits that neither outcome sign (gains vs. losses) nor outcome magnitude (small vs. large) should affect delay discount rates, both do, and moreover, they interact: in three studies, we show that whereas large gains are discounted less than small gains, large losses are discounted more than small losses. This interaction can be understood through a reconceptualization of fixed‐cost present bias, which has traditionally described a psychological preference for immediate rewards. First, our results establish present bias for losses—a psychological preference to have losses over with now. Present bias thus predicts increased discounting of future gains but decreased (or even negative) discounting of future losses. Second, because present bias preferences do not scale with the magnitude of possible gains or losses, they play a larger role, relative to other motivations for discounting, for small magnitude intertemporal decisions than for large magnitude intertemporal decisions. Present bias thus predicts less discounting of large gains than small gains but more discounting of large losses than small losses. The present research is the first to demonstrate that the effect of outcome magnitude on discount rates may be opposite for gains and losses and also the first to offer a theory (an extension of present bias) and process data to explain this interaction. The results suggest that policy efforts to encourage future‐oriented choices should frame outcomes as large gains or small losses. Copyright © 2012 John Wiley & Sons, Ltd.     

Prospects behind bars: Analyzing decisions under risk in a prison population

Criminal activity often involves considerable risks. It is therefore not surprising that criminals have been speculated to differ from noncriminals in risk attitude. Yet, few data exist to support this assumption. Moreover, the psychological underpinnings of differences in risk attitude are currently little understood. We presented prisoners and controls with sets of risky decision tasks and modeled their responses using cumulative prospect theory (CPT). The two groups showed several differences. Prisoners were more risk seeking than nonprisoners in lotteries involving losses, but they were less risk seeking in lotteries involving high-probability gains. Bestfitting CPT parameters indicated a reduced sensitivity to outcomes, for both gains and losses, and a stronger loss aversion among prisoners. In addition, prisoners showed a diminished sensitivity to the probability of gains. Our results contribute to a better understanding of prisoners’ risk attitudes and the underlying mechanisms that distinguish prisoners from nonprisoners and may thus help improve interventions designed to prevent crime.     

“金钱-环境”复合收益的风险决策:价值取向的影响

现实中的环境决策,往往要在多个由"金钱-环境"复合而成的结果间做选择。人们如何对异质复合结果进行评估与选择,是决策研究面临的新课题。本研究着重考察个体金钱取向和环境取向的相对强度对复合收益风险决策的影响。结果表明,无论是采用自陈量表(实验1)或内隐联想测验(实验2)来测量价值取向,还是采用混词造句任务(实验3)来启动价值取向,均发现价值取向相对强度对复合风险决策有显著影响。(1)相比于金钱取向占优的个体,环境取向占优的个体在进行复合风险决策时更偏好环境风险较小的复合选项;(2)在复合选项等价匹配任务中,环境取向占优的个体会赋予复合选项中的环境收益以更高权重,倾向于用更多的金钱收益来弥补环境收益的风险折扣;(3)在复合收益风险概率匹配任务中,环境取向占优的个体更倾向于为获取倍增的环境收益而承担更大的复合收益风险。作为对复合结果风险决策的首次探索,本研究初步回答了不同价值取向的个体在金钱-环境复合风险决策中更倾向于规避什么风险、拿什么冒险以及为什么冒险等问题,为今后进一步开展复合决策研究打下了理论和方法基础。     

Double Reference Points: the Effects of Social and Financial Reference Points on Decisions Under Risk

The existing literature is inconsistent about how social comparison affects risk attitudes. We propose a framework where the total utility is composed of the social and financial utilities. The financial utility is consistent with prospect theory (i.e., an S‐shaped utility function with a financial reference point), whereas the social utility is affected by both social and financial reference points. Therefore, social risk attitudes are determined by interaction between gains/losses in both social and financial contexts. On the basis of safety‐first principle, we propose that when experiencing financial gains, individuals tend to seek upside potential and take social risks (i.e., a convex social utility function). In contrast, when facing financial losses, people would be more risk seeking in social gains but more risk averse in social losses to maximize security (i.e., an inverse S‐shaped utility function). We also propose that the relative importance of financial and social utilities depends on the saliency of the reference points and size of stakes. Studies 1 and 2 showed that individuals were risk seeking in both social gains and losses with social reference points alone. Studies 3 and 4 demonstrated that when both financial and social reference points were salient, participants were risk averse in both social gains and losses when facing financial gains, but risk seeking in social gains and risk averse in social losses when facing financial losses. The hypotheses derived from the theoretical framework were in general supported by our experiments. Copyright © 2015 John Wiley & Sons, Ltd.     

Human risky choice in a repeated-gambles procedure: an up-linkage replication of Lakshminarayanan, Chen and Santos (2011)

Lakshminarayanan et al. (J Exp Soc Psychol 47: 689–693, 2011) showed that when choice is between variable (risky) and fixed (safe) food amounts with the same expected values, capuchins prefer the safe alternative if choice is framed as a gain, but the risky alternative if it is framed as a loss. These results seem similar to those seen in human prospect-theory tests in choice between variable and fixed gains or losses. Based on this similarity, they interpreted their results as identifying a between-species commonality in cognitive function. In this report, we repeat their experiment with humans as subjects (an up-linkage replication). Whether choices were rewarded with candy or nickels, choice approximated indifference whether framed as gains or losses. Our data mirror those of others who found that when humans make risky choices within a repeated-trials procedure without verbal instruction about outcome likelihoods, preference biases seen in one-shot, language-guided, prospect-theory tests such as Tversky and Kahneman’s (Science 211:453–458, 1981) reflection effect may not appear. The disparity between our findings and those of Lakshminarayanan et al. suggests their study does not evidence a cognitive process shared by humans and capuchins.     

Decision by sampling: The role of the decision environment in risky choice

Decision by sampling (DbS) is a theory about how our environment shapes the decisions that we make. Here, I review the application of DbS to risky decision making. According to classical theories of risky decision making, people make stable transformations between outcomes and probabilities and their subjective counterparts using fixed psychoeconomic functions. DbS offers a quite different account. In DbS, the subjective value of an outcome or probability is derived from a series of binary, ordinal comparisons with a sample of other outcomes or probabilities from the decision environment. In this way, the distribution of attribute values in the environment determines the subjective valuations of outcomes and probabilities. I show how DbS interacts with the real-world distributions of gains, losses, and probabilities to produce the classical psychoeconomic functions. I extend DbS to account for preferences in benchmark data sets. Finally, in a challenge to the classical notion of stable subjective valuations, I review evidence that manipulating the distribution of attribute values in the environment changes our subjective valuations just as DbS predicts.     

The Effects of Mood on Managerial Risk Perceptions: Exploring Affect and the Dimensions of Risk

Abstract

The effects of managerial mood on situational risk perceptions were tested among 85 managers from a variety of organizations, industries, and positions in Singapore. A risk-assessment scenario was developed that systematically varied the risk dimensions of outcome uncertainty, potential gains and losses, situational framing, and personal expectations. Negative, neutral, and positive moods were induced by having managers recall and describe work events. As affective state became more positive, managers perceived situational framing as more positive, and their beliefs that they could influence risky outcomes increased. Additionally, positive affect increased the likelihood that people who perceived situations as risky would select riskier courses of action.     

The effects of mood on managerial risk perceptions: exploring affect and the dimensions of risk.

The effects of managerial mood on situational risk perceptions were tested among 85 managers from a variety of organizations, industries, and positions in Singapore. A risk-assessment scenario was developed that systematically varied the risk dimensions of outcome uncertainty, potential gains and losses, situational framing, and personal expectations. Negative, neutral, and positive moods were induced by having managers recall and describe work events. As affective state became more positive, managers perceived situational framing as more positive, and their beliefs that they could influence risky outcomes increased. Additionally, positive affect increased the likelihood that people who perceived situations as risky would select riskier courses of action.     

The Effect of Multiple Reference Points and Prior Gains and Losses on Managers′ Risky Decision Making

This study examines the impact of two contextual features of decision settings on managers′ risky behavior. Considerable research indicates that decision makers exhibit risk avoiding or risk taking behavior depending upon whether options are viewed as gains or losses with respect to a given reference point. We argue in this paper that multiple points of reference are important determinants of risky behavior in many decision contexts, and that research should explicitly consider their effect to fully understand and predict risky behavior. The analysis of contextual features is extended to consider the impact of prior gains and losses in the second part of the paper. Seventy-two professional corporate managers participated in two experiments that involved a corporate investment decision setting. The setting exemplifies a context that has both multiple important points of reference and prior gains and losses. The data indicated that the presence of multiple relevant reference points results in a complex pattern of risky behavior, where managers′ decisions to accept or avoid risk were affected by the relative positions of risky alternatives with respect to two important points of reference. In particular, a mixture of risk taking and risk avoiding occurred for options between the relevant reference points. The managers were also found to be more willing to accept risk after experiencing a prior gain as opposed to a prior loss. These findings point to the importance of considering such task characteristics when attempting to predict and understand risky behavior across a variety of task contexts.     

Better Safe than Sorry: Risking Irresponsibility by Seeking Uncertainty

Research findings differ as to whether choosing a risky option is an efficient strategy for decision makers seeking to avoid responsibility for potential failures. A risky choice may leave the final outcome to chance factors, but the decision maker can still be held responsible for choosing risk. Further, it is unclear whether a risky choice is a responsible choice. The present article investigates the putative relationship between risk‐taking and responsibility by drawing a distinction between being responsible for the outcome (R1) versus acting responsibly (R2). Four experiments were performed, in which participants were presented with scenarios describing decision makers facing a choice between a risky (uncertain) option and a riskless (certain) option, framed in terms of losses or equivalent gains. The results showed that decision makers who chose the risky alternative were judged to have acted in a less responsible manner (R2), while still being held equally responsible for the outcome (R1), unless they were ignorant of the risks involved. Choosing risk did not absolve decision makers from blame, despite being less causal and less in control than those who chose the riskless option. Risky decision makers were also judged to be more personally involved. The dissociation between R1 and R2 ratings confirms earlier findings and serves to clarify an alleged relationship between risky choices and responsibility aversion. Framing effects for own choices were found in both scenarios. In contrast, responsibility ratings were only slightly affected by frame. Copyright © 2017 John Wiley & Sons, Ltd.     

Risk and Prisoner's Dilemma: A Reinterpretation of Coombs' Re‐parameterization

We propose a model to measure risk in a prisoner's dilemma based on Coombs' (1973) re‐parameterization of the game as an individual risk decision‐making task that chooses between a gamble of cooperation and another gamble of defection. Specifically, we propose an index, r, to represent the risk associated with cooperation relative to defection. In conjunction with Rapoport's (1967) index of cooperation (K), our formulation of risk allows us to construct games that vary in risk (as indexed by r) while controlling for cooperativeness (as indexed by K). Following utility analysis that models risk seeking as a convex utility function and risk averse as a concave function, we predict that risk‐seeking people cooperate more in games that the cooperation choice is more risky, whereas risk‐averse people cooperate more in games that the cooperation choice is less risky. In the three studies that we varied game parameters, used different measures of risk orientation and prosocial orientation and used different experimental procedures, we found robust results supporting our predictions. Theoretical analysis of our formulation further suggests that risk and cooperativeness of a prisoner's dilemma game is not entirely independent. Games that have a higher cooperativeness index are necessarily more risky. Copyright © 2011 John Wiley & Sons, Ltd.