Changing plans: Dynamic inconsistency and the effect of experience on the reference point

This article presents a new test of a principle of decision making calleddynamic consistency. This principle was tested in an experiment in which participants were asked to make decisions about a second gamble within a sequence of two gambles. Participants were first asked to make a planned choice about the second gamble. The planned choice was madebefore the first gamble was played and was conditioned on the anticipated outcomes of the first gamble.After the first gamble was played, the same participants were asked to make a final choice about the second gamble, conditioned on the experienced outcome of the first gamble. The results showed that participants’ final choices were frequently inconsistent with their plans, even when the anticipated and experienced outcomes were identical. These inconsistencies occurred in a systematic direction. Experiencing an anticipated gain resulted with a change toward risk aversion, and experiencing an anticipated loss resulted in a change toward risk seeking. These results are explained in terms of the effect of actual experience on the reference point used for the evaluation of the decision problem.     

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     

Additivity of risk in portfolios

A collection of gambles constituting a portfolio may itself be represented as a single gamble played once. A portfolio may be constructed by requiring each component gamble to be played once, and there is a theory of additive risk which requires that the perceived risk of the portfolio be an additive function of the perceived riskiness of the component gambles. Alternatively, a portfolio may be constructed as a probability mixture of the component gambles, and there is a theory of expected risk which requires that the perceived risk of the portfolio be the average of the riskiness of the component gambles. Existing evidence suggests that both of these theories cannot be true. A test of additivity of portfolios under both kinds of composition functions was made under two forms of display, the components displayed separately and fused as a single gamble. This experiment supports expected risk and rejects additive risk, especially under fused display.     

Risk perception and victim perception: The judgment of HIV cases

There is a vast literature confirming that reactions to different risks are strongly affected by characteristics other than scientific risk estimates; most of this research has concentrated on mapping people's representations of sets of widely varying dangers (e.g. diseases, natural disasters, accidents). This study explored a potentially vital component of risk that cannot be studied by eliciting general reactions to many hazards: the extent to which who is at risk contributes to perceptions and judgments of a risk. While it may be preferable to assume that misfortunes affect the population uniformly, of course the truth is not so egalitarian. Thus, for both theoretical and policy reasons, it is worth exploring psychometrically representations of a particular risk as it affects different people. Using multidimensional scaling and hierarchical cluster analysis, we constructed models of respondents' representations of a disease assumed to be particularly affected by victim perception: Human Immunodeficiency Virus (HIV). Subjects rated the similarity of all possible pairs among 16 scenarios involving HIV infection; the scenarios contained information about both the victim and the method of contraction. A set of attribute scales as well as political/demographic information allowed us both to interpret the structures and to predict individual differences. The results confirmed that reactions to HIV infection are greatly affected by reactions to the victim. In particular, the perceived distastefulness and riskiness of the method of infection loomed larger than did either the overall likability of the victim or the general riskiness of the victim's behavior. Further, the salience of the most statistically influential dimension, ‘deservedness’, depended significantly on demographic and political characteristics of the respondents, suggesting that the relationship between personal values and risk perception is in part mediated by victim perception. Implications for risk perception work and public policy are discussed.     

Consequences of Regret Aversion: Effects of Expected Feedback on Risky Decision Making

Previous research has considered the question of how anticipated regret affects risky decision making. Several studies have shown that anticipated regret forces participants towards the safe option, showing risk-aversion. We argue that these results are due to the previous confounding of the riskiness of the options with the feedback received. Our design unconfounds these factors, and we predict that participants will always tend to makeregret-minimizingchoices (rather than risk-minimizing choices). We present three experiments using a “choices between equally valued alternatives” paradigm. In these experiments we manipulate whether the risky or safe gamble is the regret-minimizing choice by manipulating which gamble(s) will be resolved. As predicted, participants tend to choose the regret-minimizing gamble in both gains and losses and in both relatively high risk and relatively low risk pairs of gambles. We consider the implications of these results for the role of regret in choice behavior.     

Multiple prospect framing and decision behavior: The mediational roles of perceived riskiness and perceived ambiguity

Decision makers facing a multiple prospect, which is a bundle of single prospects, are influenced by whether outcome information is framed narrowly (segregated) or broadly (aggregated). The present research hypothesizes perceived riskiness and perceived ambiguity as two distinct mediators of the effect of broad versus narrow prospect framing on decision behavior. Perceived riskiness and perceived ambiguity were conceptually defined as psychological constructs and new multi-item scales were developed and validated to operationalize them. Two experiments (a 100-shot gamble in Experiment 1, N = 118, and a 30-year retirement investment in Experiment 2, N = 84) were conducted. Both experiments supported all three hypotheses: riskiness and ambiguity perceptions were distinct constructs (Hypothesis 1), perceived riskiness mediated the effect of multiple prospect framing on decision behavior (Hypothesis 2), and perceived ambiguity mediated the effect of multiple prospect framing on decision behavior (Hypothesis 3). These findings advance our understanding of the psychological mechanisms underlying framing effects for multiple prospects and have substantial business and policy implications.     

The role of motivation and volition in economic decisions: Evidence from eye movements and pupillometry

Economic decisions usually involve high stakes, real consequences, and some degree of personal risk. This article explores the impact of motivational and volitional states on economic decision processes in an incentivized lottery choice task. We investigated the patterns of decision time, choice, information search, and pupil dilation dependent on an experimental manipulation of motivation and volition, that is, the deliberative and the implemental mindset. The results indicated that choice preferences in economic decisions were robust and remained unaffected by motivational and volitional states, but decision processes were notably impacted. Decision makers in a deliberative state of mind searched for information more extensively and made slower decisions than the baseline. The implemental mindset was associated with more attention paid to the probability attributes of the gambles relative to the deliberative mindset. Furthermore, we observed that gamble outcomes that entailed no win at all (i.e., zero outcomes) played an important role for information search. These outcomes were largely disregarded in terms of predecisional information search but elicited pupillary responses similar to very high outcome lotteries. These results inform the current debate about the zero effect in risky choice. We also discuss the potential of eye-tracking studies of risky choice to dissolve ambiguities concerning the contributions of effort and arousal to modulating pupillary response. Implications for theoretical advances in decision research are discussed.     

Cognitive processes underlying lottery and sports gambling decisions: The role of stated probabilities and background knowledge

Two studies compared choice and underlying cognitive processes in equivalent decision tasks involving risk and uncertainty (lotteries versus sports gambles including displayed expert probability judgements). In sports gambles, background knowledge was triggered via information on team location, home or away. Otherwise, displayed risk information (stake, winnings, odds, and outcome probabilities) was controlled across gamble type. In a choice study, home win bets were chosen significantly more frequently than draws or away wins, compared to lottery equivalents. In a parallel study eliciting concurrent verbal protocols, participants made fewer evaluations of odds and probabilities, and more statements involving background knowledge in sports gambles. Furthermore, some sports gamble protocols indicated modifications of stated probabilities and decision strategies contingent on domain knowledge. It was concluded that stated probability revision and knowledge-based reasoning are key cognitive processes in sports gambling not normally applied in the lottery paradigms often employed in decision research.     

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.     

How do we evaluate future gambles? Experimental evidence on path dependency in risky intertemporal choice

This study reports three experiments which demonstrate path dependency in risky intertemporal choice. Consider a lottery to be resolved and paid in a future time period. One can obtain the present value of this lottery in three different ways: (1) eliciting directly the present certainty equivalent (CE) of the future lottery (direct path); (2) eliciting the future CE and then discounting this amount to the present (risk‐time path); and (3) eliciting the present value of the risky prospect and then determining the CE of this current lottery (time‐risk path). Standard rational choice models such as the discounted expected utility model, assume a multiplicative model, where all three methods mentioned above would yield the same value. We conducted three studies to examine if this is the case: Experiments 1 and 2 were based on a set of matching‐task questions and Experiment 3 used a process‐tracing design to analyze the natural sequence of decision making by the subjects. These three studies show that the evaluation of future gambles is path‐dependent. The present values elicited under the time‐risk and direct paths are, on average, higher than those reported under the risk‐time path. In addition, we found evidence for a two‐stage evaluation of risky future prospects: When evaluating a future gamble, individuals first assess the present value of the gamble (time discounting) and then they determine a certainty equivalent (probability discounting). Copyright © 2008 John Wiley & Sons, Ltd.     

Gender and Risk in Public Performance

The scarcity of women as contestants on the nationally televised quiz show Who Wants to Be a Millionaire provided the impetus to study gender and risk. In three simulated studies we investigated perception of risk and decision making about whether to engage in a televised public performance. Gender differences consistent with the risk assessment literature were found. Women considered going on the show to be more personally risky, were more concerned about doing poorly in public, and were less likely to risk entering their names. Results were discussed in terms of motivation to avoid negative social consequences. Implications of the findings for women's participation in public life are discussed.     

Self‐framing of risky choice

Previous research on framing effects has largely focused on how choice information framed by external sources influences the response of a decision maker. This research examined how decision makers framed choice options and how the hedonic tone of self‐framing influenced their risk preference. By using pie charts and a complementary sentence‐completion task in Experiment 1, participants were able to interpret and frame the expected choice outcomes themselves before making a choice between a sure option and a gamble in either a life–death or a monetary problem. Each of these self‐frames (phrases) was then rated by a group of independent judges in terms of its hedonic tone. The hedonic tone of self‐frames was mostly positive and was more positive in the life–death than the monetary context, suggesting a motivational function of self‐framing. However, positive outcomes were still more likely to be framed positively than negative outcomes. In Experiment 2, choice outcomes were depicted with a whole‐pie chart instead of a pie slice in order to emphasize positive and negative outcomes equally. The results showed that the hedonic tone of self‐framing was still largely positive and more positive in the life domain than the monetary domain. However, compared to Experiment 1, the risk preference in the life–death domain was reversed, showing an outcome salience effect: when the pie‐slice chart emphasized only survival outcomes, participants were more risk taking under positive hedonic frames whereas when the whole‐pie chart depicted both survival and mortality outcomes, they became risk averse under positive frames. In sum, self‐framing reflected a positive bias in encoding risk information and affected the risk preference of the decision maker. Like the tone of voice used in communication, the hedonic tone of self‐framing, either positive or negative, can affect risk perception of a choice problem. Copyright © 2003 John Wiley & Sons, Ltd.     

Risky decision: Attention and path dependency as a function of response mode

It was previously shown and was here replicated that the amount of money required to induce a subject to exchange one gamble for a second and then the second for a third depends on the second (intermediate) gamble. This path dependency cannot be explained by any of the algebraic models (including SEU), nor can it be explained as a simple attention effect. A model was put forward which explains the effect in terms of differential masking depending on a kind of stimulus—response compatibility. The effect of response mode on path dependency was examined in this study; similarity judgements showed no consistent path dependency nor did difference in rated attractiveness of gambles presented in pairs, but rated attractiveness was different for gambles presented singly. Since it might be that monetary response emphasises the monetary aspects, that is, the winning amount of the gamble, it was thought that a probability response would emphasise the probability of winning. However, when subjects were asked to set the probability of winning $ 12 which would induce them to exchange one gamble for another, not only was no path dependency observed, but the subjects' responses seemed to depend only on the difference in expected value of the gambles. This suggests the possibility of developing response-display modes which would eliminate or at least attenuate the inconsistencies observed in risky decision processes.     

Relational Risk and Its Personal Correlates in Strategic Alliances

In this study we focus on the perception of one particular type of risk in the context of strategic alliances—relational risk. Perceived relational risk refers to the degree to which decision makers are concerned with the partner's opportunistic behavior in cooperative efforts. We develop a measure of relational risk in strategic alliances, and empirically examine some of its personal correlates. Based on a survey of senior executives of corporations and MBA students, we found partial support for the principal hypothesis that the perception of relational risk for prospective strategic alliances is related to an individual's age and trust in people.     

投资者风险感知与风险倾向对风险决策的影响——基于民间投资者的样本

采用模拟投资任务和问卷测查的方式,考察了投资者的风险感知、风险倾向对其风险决策的影响,并对风险感知与风险倾向的交互作用进行分析。结果发现：①投资者的风险感知对其风险决策有显著的负向作用;②投资者的风险倾向对其风险决策有显著的正向作用;③风险感知对风险决策的影响作用部分通过风险倾向这一中介完成。     

结果评价中自我体验与替代体验的参照点效应:一项赌博游戏的ERPs研究

本研究采用"投注—反馈"的虚拟赌博游戏范式,通过2个实验分别检测个体在评价自己决策结果 (实验1)和观察他人决策结果 (实验2)过程中赌注大小(即参照点)对大脑活动的影响。结果发现:(1)体验自我决策结果时,输钱比赢钱诱发更负的FRN,仅有一个负反馈(-10元)表现出以赌注为界的分离,且相对效价一样的反馈值诱发的FRN差异不显著;(2)体验他人决策结果时,无论输赢,有赌注比无赌注诱发的FRN更负;而且相对效价相同的反馈值诱发的FRN差异不显著。据此可以认为,FRN一定程度上反映了以赌注为基准的主观标准对社会信息的评价判断:自我体验中的个体对损失的敏感度远高于收益;而替代体验中的个体更倾向于将"损失更多"看作一种负性结果。     

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.     

Current issues and new directions in Psychology and Health : Bringing basic and applied research together to address underlying mechanisms

Three different studies were conducted to examine the impact of heuristic reasoning in the perception of health-related events: lifetime risk of breast cancer (Study 1, n = 468), subjective life expectancy (Study 2, n = 449), and subjective age of onset of menopause (Study 3, n = 448). In each study, three experimental conditions were set up: control, anchoring heuristic and availability heuristic. Analyses of Covariance controlling for optimism, depressive mood, Locus of Control, hypochondriac tendencies and subjective health, indicated significant effect of experimental conditions on perceived breast-cancer risk (p = 0.000), subjective life expectancy (p = 0.000) and subjective onset of menopause (p = 0.000). Indeed, all findings revealed that availability and anchoring heuristics were being used to estimate personal health-related events. The results revealed that some covariates, hypochondriac tendencies in Study 1, optimism, depressive mood and subjective health in Study 2 and internal locus of control in Study 3 had significant impact on judgment of riskiness.     

Consequences of Regret Aversion 2: Additional Evidence for Effects of Feedback on Decision Making

We discuss the effects of anticipated and experienced regret on decision making under uncertainty. In previous research, using the standard, context-free, gamble paradigm, we found that decision makers anticipate the regret they can experience as a result of post-decisional feedback on forgone outcomes (Zeelenberg, Beattie, van der Pligt, & de Vries, 1996). In the present research we move away from the gamble paradigm, on to richer contexts. In Experiments 1 and 2, involving investment decision making and decision making in the ultimatum game, it is shown that the expectation of feedback on forgone outcomes influences decision making and can promote more risk seeking behavior. Experiment 3 focused on effects of retrospective regret and shows that actual feedback on foregone outcomes influences the experience of regret and subsequent decision making. The results of these studies support our earlier work on regret aversion.     

Modeling dynamic inconsistency with a changing reference point

A rational principle of decision making called dynamic consistency was tested by presenting decision makers with a sequence of two gambles. The first gamble was obligatory. Before playing the first gamble, participants were asked to make a planned choice as to whether they would take the second gamble. After experiencing the actual results of the first gamble, decision makers were asked to make a final choice regarding the second gamble. Dynamic consistency requires agreement between the planned and final choices. Violations of dynamic consistency were observed, e.g. anticipating a gain in the first gamble, decision makers planned to take the second gamble; after experiencing the gain, they changed their minds and rejected the second gamble. Two models of dynamic inconsistency were compared. One assumes that experience shifts the reference point and changes the utility associated with the gamble; another assumes that experience changes the subjective probability associated with the gamble. The reference point model provided the best account for the findings. Copyright © 2003 John Wiley & Sons, Ltd.