Which Is Better: Simultaneous or Sequential Choice?

The term "diversification bias" refers to the tendency for people to take more variety when choosing several items simultaneously than when choosing them sequentially. In this article, we investigate whether this really is a bias by measuring evaluations of sets chosen simultaneously or sequentially. In Experiment 1 participants made two choices between audio tracks for consecutive consumption. Participants liked low-variety sets most and were more likely to choose high-variety sets in simultaneous choice. In Experiment 2 participants chose between three gambles which varied in the probability of winning and their expected value. Again, simultaneous choices seemed worse than sequential ones: The simultaneous-choice groups took far more low expected value gambles than did sequential-choice subjects and rated their enjoyment as lower. We conclude that simultaneous choice often leads to outcomes that are worse than sequential choice and discuss the circumstances when this is likely to be true.     

Information overload or search-amplified risk? Set size and order effects on decisions from experience

How do changes in choice-set size influence information search and subsequent decisions? Moreover, does information overload influence information processing with larger choice sets? We investigated these questions by letting people freely explore sets of gambles before choosing one of them, with the choice sets either increasing or decreasing in number for each participant (from two to 32 gambles). Set size influenced information search, with participants taking more samples overall, but sampling a smaller proportion of gambles and taking fewer samples per gamble, when set sizes were larger. The order of choice sets also influenced search, with participants sampling from more gambles and taking more samples overall if they started with smaller as opposed to larger choice sets. Inconsistent with information overload, information processing appeared consistent across set sizes and choice order conditions, reliably favoring gambles with higher sample means. Despite the lack of evidence for information overload, changes in information search did lead to systematic changes in choice: People who started with smaller choice sets were more likely to choose gambles with the highest expected values, but only for small set sizes. For large set sizes, the increase in total samples increased the likelihood of encountering rare events at the same time that the reduction in samples per gamble amplified the effect of these rare events when they occurred—what we call search-amplified risk. This led to riskier choices for individuals whose choices most closely followed the sample mean.     

The Influence of Positive Affect on the Decision Rule in Risk Situations: Focus on Outcome (and Especially Avoidance of Loss) Rather Than Probability

Two experiments examined the influence of positive affect on probability estimation and choice. Participants in whom positive affect had been induced, as well as no-manipulation controls, were asked to make both numerical evaluations of verbal probabilities in three-outcome gambles and actual betting decisions about similar gambles. Results from Experiment 1 showed the phenomenon labeledcautious optimism:Positive affect participants significantly overestimated the probabilities associated with phrases for winning relative to their estimates of probability of losing for the same phrases (optimism), while participants in a control condition did not; yet, in actual gambling situations, affect condition participants were much less likely to gamble than were controls when a real loss was possible (caution). Results of the betting task from Experiment 2 further indicated that affect participants used a betting-decision rule that was different from that of controls: They bet less than controls in gambles where potential losses were large, even though probability of loss was small, and they bet more than controls in gambles where the amount of the potential loss was small, even though the probability of loss was moderate or large. These findings suggest that positive affect can promote an overt shift from a decision rule focusing primarily on probabilities to one focusing on utilities or outcome values, especially for losses. Taken together, the results are compatible with an interpretation of the influence of positive affect in terms of an elaboration of positive cognitive material, and purposive behavior in decisions, rather than in terms of mere response bias.     

Expectation theories of decision making for duplex gambles

Complete tests of subjectively expected utility (SEU), subjectively expected value (SEV), expected utility (EU) and expected value (EV) theories were made for duplex gambles without measuring subjective probability or subjective utility. All gambles were hypothetical and offered on booklets. The duplex gambles consisted of winning gambles, which offered a chance to win a certain amount of money or to break even; and losing gambles, which offered a chance to lose a certain amount of money or break even.The results indicated that SEU, SEV and EU theories could not account for the strategies of 33%, 53% and 86% of the Ss respectively in the losing form of gambles, while EV theory accounted for 78% of the behavior of Ss.In the winning form of gambles, SEU, SEV and EU theory held for 77%, 65%, and 54% of the Ss respectively, while EV theory held for only 40% of the Ss. Suggestions for further research were made.     

Comparing Risky Decision Making Under Conditions of Real and Hypothetical Consequences

In a series of three experiments, subjects made risky decisions under conditions of hypothetical or real consequences. Task variations across experiments included: (1) type of risk (monetary gambles or investments of time and effort), (2) within-subject and between-subjects manipulations of consequence condition, and (3) single or multiple decisions. The hypothesis of no difference between choices in real and hypothetical consequence conditions was retained in each experiment. Supplemental analyses ruled out various “artifactual” interpretations of the null results. Discussion focused on conditions in which researchers can and cannot infer decision makers’ actual risk preferences from their responses in laboratory tasks.     

Leader‐driven distortion of probability and payoff information affects choices between risky prospects

Research indicating that decision makers often distort new information to favor nascent preferences has focused primarily on riskless choice rather than risky choice. In addition, the critical assumption that information distortion mediates the link between the initially preferred alternative and the final choice has not been tested in a compelling manner. In an experiment designed to fill these gaps, participants made six choices involving pairs of hypothetical three‐outcome monetary gambles. We manipulated initial preferences by varying the order in which gamble features were presented. Multilevel regressions indicated that participants distorted their evaluations of precise probabilities and payoffs in the direction of their emerging preferences and that they used their biased evaluations to update those preferences. As expected, information distortion mediated the effect of initial preferences on final choices and final preference strength. In a follow‐up experiment, we compared a standard measure of information distortion (based on comparisons to mean ratings in a no‐choice control task) to a more personalized measure (based on participants' own ratings in the control task) and found the mean‐based measure to be superior for the probability and payoff information in question. Other findings in Experiment 2 corroborated the results of Experiment 1. In both studies, the distortion of quantitative inputs in a simple task highlights the non‐normative circularity of the choice process. Copyright © 2010 John Wiley & Sons, Ltd.     

Strategy Selection in Risky Choice: The Impact of Numeracy,Affect, and Cross‐Cultural Differences

Real‐world decisions often involve options with outcomes that are uncertain and trigger strong affect (e.g., side effects of a drug). Previous work suggests that when choosing among affect‐rich risky prospects, people are rather insensitive to probability information, potentially compromising decision quality. We modeled the strategies of less and more numerate participants in the United States and in Germany when choosing between affect‐rich prospects and between monetarily equivalent affect‐poor prospects. Using large probabilistic national samples (n = 1047 from the United States and Germany), Study 1 showed that compared with more numerate participants, less numerate participants chose the normatively better option (i.e., the one with the higher expected value) less often, guessed more often, and relied more on a simple risk‐minimizing strategy. U.S. participants—although less numerate—selected the normatively better option more frequently and were more consistent across affect‐rich and affect‐poor problems than the German participants. Using a targeted quota sample (n = 118 from Germany), Study 2 indicated that although both more and less numerate participants paid less attention to probability information in affect‐rich than in affect‐poor problems, the two numeracy groups relied on different outcome‐based heuristics: More numerate participants often followed the minimax heuristic, and less numerate participants the affect heuristic. The observed strategy differences suggest that attempts to improve decision‐making need to take into account individual differences in numeracy as well as cultural‐specific experiences in making trade‐offs. Copyright © 2012 John Wiley & Sons, Ltd.     

Sizing up information distortion: quantifying its effect on the subjective values of choice options

When choosing between options, people often distort new information in a direction that favors their developing preference. Such information distortion is widespread and robust, but less is known about the magnitude of its effects. In particular, research has not quantified the effects of distortion relative to the values of the choice options. In two experiments, we manipulated participants’ initial preferences in choices between risky three-outcome monetary gambles (win, lose, or neither) by varying the order of five information items (e.g., amount to win, chance of losing). In Experiment 1 (N = 397), the effect of initial information on gambles’ certainty equivalents (subjective values) was mediated by the distortion of later information. The indirect effect on the difference between gambles’ certainty equivalents averaged 27% of the gambles’ mean expected value. In Experiment 2 (N = 791), we increased the difference between gambles on a later information item to overcome the effect of initial information on participants’ choices. The required change averaged 31% of the gambles’ mean expected value. We conclude that the effects of information distortion can be substantial.     

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.     

Risky choice: An examination of information acquisition behavior

The monitoring of information acquisition behavior, along with other process tracing measures such as response times, was used to examine how individuals process information about gambles into a decision. Subjects indicated preferences among specially constructed three-outcome gambles. The number of alternatives available was varied across the sets of gambles. A majority of the subjects processed information about the gambles in ways inconsistent with compensatory models of risky decision making, such as information integration (Anderson & Shanteau, 1970). Furthermore, the inconsistency between observed information acquisition behavior and such compensatory rules increased as the choice task became more complex. Alternative explanations of risky choice behavior are considered.     

How does preference reversal appear and disappear? Effects of the evaluation mode

Preference reversal is a systematic change in the preference order between options when different response methods are used (e.g., choice vs. judgment). The present study focuses on procedures used to elicit preferences according to an evaluability hypothesis. Two experiments compared joint vs. separate evaluations and explicit vs. non‐explicit joint evaluations. Subjects had to express preferences between high‐variance gambles (HVGs) and low‐variance gambles (LVGs) either by choosing one gamble to play in a lottery or by assigning gambles minimum selling prices. We show that HVGs are preferred in both choice and pricing conditions when gambles are evaluated separately, and LVGs are preferred in both choice and selling conditions when gambles are evaluated in pairs: i.e., when the evaluation mode is held constant, classic preference reversal disappears. These results support the evaluability hypothesis, and suggest that preferences depend on whether subjects are allowed to compare the options they are asked to choose from or judge, independently of the nature of the scale (i.e., attractiveness vs. minimum selling price) they are required to adopt. Copyright © 2004 John Wiley & Sons, Ltd.