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.     

Risk attitude in small timesaving decisions

Four experiments are presented that explore situations in which a decision maker has to rely on personal experience in an attempt to minimize delays. Experiment 1 shows that risk-attitude in these timesaving decisions is similar to risk-attitude in money-related decisions from experience: A risky prospect is more attractive than a safer prospect with the same expected value only when it leads to a better outcome most of the time. Experiment 2 highlights a boundary condition: It suggests that a difficulty in ranking the relevant delays moves behavior toward random choice. Experiments 3 and 4 show that when actions must be taken during the delay (thereby helping compare delays), this increases the similarity of timesaving decisions to money-related decisions. In these settings the results reflect an increase in risk aversion with experience. The relationship of the results to the study of non-human time-related decisions, human money-related decisions and human time perception is discussed.     

The Effects of Decision Outcome Dispersion Upon Organizational Decision Making

The effects of varying decision outcome dispersion on organizational decision making were investigated under individual and group decision making conditions. Thirty-six female and pg]36 male subjects made decisions for organizational decision scenarios in which outcomes affected primarily the decision maker, people other than the decision maker, or a group of which the decision maker was a member. Subjects rated their levels of perceived risk and confidence in their decisions and made decisions within a simulated context of either a small or a large organization. Results indicated that subjects perceived significantly less risk and more confidence in their decisions when outcomes affected primarily themselves rather than others regardless of whether the decisions were made individually or by a group. Males perceived their decisions as significantly more risky than females. Induced organizational size did not significantly influence decision making.

     

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。     

How to keep children safe in traffic: find the daredevils early

Crossing the street in front of oncoming vehicles poses serious danger to young children. But is each young pedestrian similarly at risk? The authors aimed to identify children who are particularly prone to making risky and potentially harmful crossing decisions. They used a simple game involving risk to classify 5- to 6-year-olds as risk takers or risk avoiders. Children classified as risk takers made more crossing decisions at a busy 1-way street than risk avoiders, tolerated shorter time intervals between initiation of the crossing decision and arrival of the next vehicle, and were more likely to cause a (hypothetical) accident. Finally, they made decisions more quickly than risk avoiders. The authors discuss the implication of these results for traffic safety programs.     

On the Decision to Explore New Alternatives: The Coexistence of Under‐ and Over‐exploration

The decision whether to explore new alternatives or to choose from familiar ones is implicit in many of our daily activities. How is this decision made? When will deviation from optimal exploration be observed? The current paper examines exploration decisions in the context of a multi‐alternative “decisions from experience” task. In each trial, participants could choose a familiar option (the status quo) or a new alternative (risky exploration). The observed exploration rates were more sensitive to the frequent outcome from choosing new alternatives than to the average outcome. That is, the implicit decision whether to explore a new alternative reflects underweighting of rare events: Over‐exploration was documented in “Rare Disasters” environments, and insufficient exploration was evident in “Rare Treasures” environments. In addition, the results reveal a decrease in exploration of new alternatives over time even when it is always optimal and some exploration even when it is never reinforcing. These results can be captured with models that share a distinction between “data collection” and “outcome‐driven” decision modes. Under the data collection mode, the decision maker collects information about the environment, to be used in future choices. Under the outcome‐driven mode, the decision maker relies on small samples of previous experiences with familiar versus unfamiliar alternatives, before the selection of a specific alternative. The predictive value of a two‐parameter “explorative sampler” quantification of these assumptions is demonstrated. Copyright © 2013 John Wiley & Sons, Ltd.     

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.     

Family conflict shapes how adolescents take risks when their family is affected

Numerous studies have established that the social context greatly affects adolescent risk taking. However, it remains unexplored whether adolescents' decision‐making behaviors change when they take risks that affect other individuals such as a parent. In the current study, we sought to investigate how the social context influences risky decisions when adolescents' behavior affects their family using a formalized risk‐taking model. Sixty‐three early adolescents (M_age = 13.3 years; 51% female) played a risk‐taking task twice, once during which they could make risky choices that only affected themselves and another during which their risky choices only affected their parent. Results showed that adolescents reporting high family conflict made more risky decisions when taking risks for their parent compared to themselves, whereas adolescents reporting low family conflict made fewer risky decisions when taking risks for their parent compared to themselves. These findings are the first to show that adolescents change their decision‐making behaviors when their risks affect their family and have important implications for current theories of adolescent risk taking.     

Peer influence on risk taking, risk preference, and risky decision making in adolescence and adulthood: an experimental study

In this study, 306 individuals in 3 age groups--adolescents (13-16), youths (18-22), and adults (24 and older)--completed 2 questionnaire measures assessing risk preference and risky decision making, and 1 behavioral task measuring risk taking. Participants in each age group were randomly assigned to complete the measures either alone or with 2 same-aged peers. Analyses indicated that (a) risk taking and risky decision making decreased with age; (b) participants took more risks, focused more on the benefits than the costs of risky behavior, and made riskier decisions when in peer groups than alone; and (c) peer effects on risk taking and risky decision making were stronger among adolescents and youths than adults. These findings support the idea that adolescents are more inclined toward risky behavior and risky decision making than are adults and that peer influence plays an important role in explaining risky behavior during adolescence.     

Knowing when to hold ‘em: regret and the relation between missed opportunities and risk taking in children,adolescents and adults

Regret over missed opportunities leads adults to take more risks. Given recent evidence that the ability to experience regret impacts decisions made by 6-year-olds, and pronounced interest in the antecedents to risk taking in adolescence, we investigated the age at which a relationship between missed opportunities and risky decision-making emerges, and whether that relationship changes at different points in development. Six- and 8-year-olds, adolescents and adults completed a sequential risky decision-making task on which information about missed opportunities was available. Children also completed a task designed to measure their ability to report regret when explicitly prompted to do so. The relationship between missed opportunities and risky decision-making did not emerge until 8 years, at which age it was associated with the ability to explicitly report regret, and was stronger in adults than in adolescents. These novel results highlight the potential importance of the ability to experience regret in children and adolescents’ risky decision-making.     

Power, risk, and the status quo: does power promote riskier or more conservative decision making?

Two experiments suggest that the experience of power can interact with a person's level of power motivation to produce effects on risky decision making. In Study 1, assignment to a position of power increased risk taking among participants with low levels of power motivation but reduced risk taking among participants with high levels of power motivation. In Study 2, participants high in power motivation again made more conservative decisions, but only under circumstances in which the dominance hierarchy was unstable and there was potential for losing their power. When power was irrevocable and participants' choices had no bearing on their ability to retain power, both high and low power-motivated participants responded by making riskier decisions. Findings suggest that although power may generally lead to riskier decisions, power may lead to more conservative decisions among power-motivated individuals, especially when the status quo is perceived to be in jeopardy.     

Effects of problem frame and gender on principals’ decision making

Research indicates people’s decisions can sometimes be influenced by seemingly trivial differences in the framing (i.e., wording) of alternative options. The tendency to prefer risk averse options when framed positively and risky options when framed negatively is known as the framing effect. The current study examined the susceptibility of school principals to the framing effect. Additionally, analytical and intuitive decision styles, the degree to which one’s typical goal is to maximize (rather than satisfice), gender, and years of experience as a principal were measured to assess whether they are predictive of principals’ choices, and to test whether they moderate the effects of framing on choice. Seventy-one principals completed six decision problems (framed either positively or negatively) and instruments assessing decision style, typical decision goal, gender, and experience. Analyses demonstrated that principals are influenced by framing. Although the positively and negatively framed versions of the decision problems were objectively identical, negative framing resulted in more risky choices. Additionally, regardless of frame, men made more risky choices than women. There was no evidence that experience, decision style, or the degree to which one’s typical decision goal was to maximize, decreased framing effects. Several potential debiasing strategies are described, and limitations are noted.     

The gap between medical and monetary choices under risk persists in decisions for others

Decisions under risk in the medical domain have been found to systematically diverge from decisions in the monetary domain. When making choices between monetary options, people commonly rely on a decision strategy that trades off outcomes with their probabilities; when making choices between medical options, people tend to neglect probability information. In two experimental studies, we tested to what extent differences between medical and monetary decisions also emerge when the decision outcomes affect another person. Using a risky choice paradigm for medical and monetary decisions, we compared hypothetical decisions that participants made for themselves to decisions for a socially distant other (Study 1) and to recommendations as financial advisor or doctor (Study 2). In addition, we examined people's information search in a condition in which information about payoff distributions had to be learned from experiential sampling. Formal modeling and analyses of search behavior revealed a similarly pronounced gap between medical and monetary decisions in decisions for others as in decisions for oneself. Our results suggest that when making medical decisions, people try to avoid the worst outcome while neglecting its probability—even when the outcomes affect others rather than themselves.     

Remembering the best and worst of times: Memories for extreme outcomes bias risky decisions

When making decisions on the basis of past experiences, people must rely on their memories. Human memory has many well-known biases, including the tendency to better remember highly salient events. We propose an extreme-outcome rule, whereby this memory bias leads people to overweight the largest gains and largest losses, leading to more risk seeking for relative gains than for relative losses. To test this rule, in two experiments, people repeatedly chose between fixed and risky options, where the risky option led equiprobably to more or less than did the fixed option. As was predicted, people were more risk seeking for relative gains than for relative losses. In subsequent memory tests, people tended to recall the extreme outcome first and also judged the extreme outcome as having occurred more frequently. Across individuals, risk preferences in the risky-choice task correlated with these memory biases. This extreme-outcome rule presents a novel mechanism through which memory influences decision making.