Integration and segregation of prior outcomes in risky decisions

Two experiments were conducted to test if a prior outcome influences the likelihood to accept a current gamble. Undergraduate students participating as subjects imagined that they on a fictitious betting day at a horse-race track did not gamble in the prior race, that they gambled and won, or that they gambled and lost. Subjects rated in one session the likelihood of gambling in the current race. In another session they rated how satisfied they would be with not gambling, with winning, and with losing, respectively. The results of Experiment 1 showed that as compared to no prior outcome the ratings of likelihood of gambling increased after a gain and decreased after a loss. This was explained by the assumption, supported by the ratings of satisfaction, that the prior outcome only affected the satisfaction with the expected loss of the current choice, making it less negative after a gain and more negative after a loss. These results were replicated in Experiment 2. In addition, if subjects did not know with certainty the outcome of a previous choice to gamble, the likelihood to accept the current gamble and the ratings of the satisfaction with its expected outcomes were largely unaffected.     

A bayesian procedure for mastery decisions based on multivariate normal test data

A Bayesian framework for making mastery/nonmastery decisions based on multivariate test data is described in this study. Overall, mastery is granted (or denied) if the posterior expected loss associated with such action is smaller than the one incurred by the denial (or grant) of mastery. An explicit form for the cutting contour which separates mastery and nonmastery states in the test score space is given for multivariate normal test scores and for a constant loss ratio. For multiple cutting scores in the true ability space, the test score cutting contour will resemble the boundary defined by multiple test cutting scores when the test reliabilities are reasonably close to unity. For tests with low reliabilities, decisions may very well be based simply on a suitably chosen composite score.This work was performed pursuant to Grant NIE-G-78-0087 with the National Institute of Education, Department of Health, Education, and Welfare, Huynh Huynh, Principal Investigator. Points of view or opinions stated do not necessarily reflect NIE positions or policy and no official endorsement should be inferred. The assistance of Joseph C. Saunders is gratefully acknowledged. The author is indebted to an anonymous referee who pointed out several computational errors in the earlier versions of the paper.     

Perceived control,nature of risk information and risk taking. An experimental test of a simple taxonomy of uncertainty

Uncertainty may be categorized along two dimensions: (1) the nature of probabilistic information (i.e. frequency information, about the outcomes of similar situations in the past, versus process information, about the way(s) in which a future loss might occur), and (2) the degree of personal control (i.e. the extent to which an activity's outcomes depend on internal factors (e.g. knowledge, skills) versus external (e.g. chance) factors). The effects of variations in both dimensions on people's risk-taking tendency were experimentally studied. In a computerized task, subjects had to stop a fast-moving symbol before it passed a target line. Success yielded a financial gain, failure led them into a ‘penalty task’ with the possibility of a considerable loss. On each trial subjects chose among 10 risk levels (varying symbol speeds): low levels resulted in small but almost sure gains, high levels yielded larger but less probable gains. Across subgroups of subjects, three penalty task characteristics were varied: (1) the actual loss probability, (2) the external versus internal determination of outcomes, and (3) the available risk information. Major findings were: (a) subjects did not set a lower risk level, but they did appear to be more attentive (i.e. they failed fewer trials) when the actual loss probability was lower; (b) internal outcome determination resulted in more failed trials (lesser caution); (c) subjects ignored frequency information, but were sensitive to process information. Results are discussed in terms of effort allocation for controlling risk during task performance.     

Pervasiveness of framing effects among physicians and medical students

Researchers have been documenting the influence of framing upon decision making for more than two decades; decisions appear to change in response to superficial changes in the presentation of possible outcomes. Several studies of medical decision making have revealed; for instance, that clinical decisions differ when options are presented as gains (survival rates) rather than losses (mortality rates). However, most studies of framing effects in the medical domain have utilized a very limited number of clinical problems that have not allowed an adequate test of the prevalence of the phenomena. To extend previous studies, we presented three groups of subjects (experienced internists, residents, and third-year medical students) with booklets containing twelve hypothetical medical cases. Half of the subjects received gain versions and half received loss versions of the same cases. Chi-square analyses revealed that framing did not influence any of the decisions of medical students and influenced the decisions of residents and experienced physicians on only two of the clinical problems (the same two problems). It appears that the prevalence of framing effects in the clinical domain may be limited.     

The impact of variability and prechoice experience on taking safety measures: The case of security updates

The goal of this research is to clarify the conditions that trigger reluctance to take cost-effective safety measures. We present three experiments. In two of the experiments, the participants were asked to operate a simulated system for 20 periods, each with 10 trials. They could “update the system” to eliminate the risk of a “security failure” that led to a loss of 100 points. The updating cost was either fixed (at 10 points) or variable (initially 10 points, and some probability of free—0 points—updates). The optimal strategy prescribed updating at the first opportunity. Another experiment focused on one-shot decision under risk. The results highlight two factors that reduce the tendency to update and impair performance: cost variability and prechoice experience. Importantly, we show that the negative impact of cost variability is the product of two tendencies. First, experiencing periods with free updates slowed learning to select the optimal policy. Second, in many cases, the participants behaved as if they plan to update when the cost of updating is low but forget to do so. The results suggest that security can be enhanced by asking users to select a default updating policy before gaining experience and by replacing “free updates” with automatic updates. Information concerning the existence of automatic updates reduced manual updating, but this effect was eliminated by experience.     

To buy or to sell: cultural differences in stock market decisions based on price trends

Four studies compared the stock market decisions of Canadians and Chinese. In two studies using simple stock market trends, compared with Chinese, Canadians were more willing to sell and less willing to buy falling stock. But when the stock price was rising, the opposite occurred: Canadians were more willing to buy and less willing to sell. A third study showed that for complex stock price trends, Canadians were strongly influenced by the most recent price trends: they tended to predict that recent trends would continue and made selling decisions without considering the rest of the trend patterns; whereas the Chinese made reversal predictions for the dominant trends and made decisions that took both recent and early trends into consideration. Study 4 replicated the finding with experienced individual investors. These findings are consistent with the previous literature on different lay theories of change held by Chinese and North Americans. Copyright © 2008 John Wiley & Sons, Ltd.     

Racial Bias in Decisions Made by Mock Jurors Evaluating a Case of Sexual Harassment

Abstract

White (N = 161) and Black (N = 152) college students served as mock jurors in a simulated civil case in which a female plaintiff accused a male defendant of sexual harassment. The authors experimentally manipulated the race (Black or White) of the litigants and asked the mock jurors to decide whether the defendant was guilty; to rate the certainty of their belief in the defendant's guilt; and, when they judged the defendant guilty, to recommend an award to the plaintiff. Mock jurors of both races tended to favor litigants of their own race and their own gender. Racial bias was highest among White male jurors and lowest among White female jurors.     

Protecting Against Low‐Probability Disasters: The Role of Worry

We carry out a large monetary stakes insurance experiment with very small probabilities of losses and ambiguous as well as exact probabilities. Many individuals do not want to pay anything for insurance whether the probabilities are given exactly or are ambiguous. Many others, however, are willing to pay surprisingly large amounts. With ambiguity, the percentage of those paying nothing is smaller and the willingness to pay (WTP) of the other individuals larger than with exact probabilities. Comparing elasticities with ambiguity, we find that worry is much more important than subjective probability in determining WTP for insurance. Furthermore, when the ambiguous loss probability is increased by a factor of 1000, it has almost no effect on WTP. Copyright © 2011 John Wiley & Sons, Ltd.     

Instance‐based Learning: A General Model of Repeated Binary Choice

A common practice in cognitive modeling is to develop new models specific to each particular task. We question this approach and draw on an existing theory, instance‐based learning theory (IBLT), to explain learning behavior in three different choice tasks. The same instance‐based learning model generalizes accurately to choices in a repeated binary choice task, in a probability learning task, and in a repeated binary choice task within a changing environment. We assert that, although the three tasks are different, the source of learning is equivalent and therefore, the cognitive process elicited should be captured by one single model. This evidence supports previous findings that instance‐based learning is a robust learning process that is triggered in a wide range of tasks from the simple repeated choice tasks to the most dynamic decision making tasks. Copyright © 2010 John Wiley & Sons, Ltd.     

Attributions for ambiguity in a treatment-decision context can create ambiguity aversion or seeking

The phenomenon of ambiguity aversion suggests that people prefer options that offer precisely rather than imprecisely known chances of success. However, past work on people's responses to ambiguity in health treatment contexts found ambiguity seeking rather than aversion. The present work addressed whether such findings reflected a broad tendency for ambiguity seeking in health treatment contexts or whether specific attributions for ambiguity play a substantial role. In three studies, people choose between two treatment options that involved similar underlying probabilities, except that the probabilities for one option involved ambiguity. The attributions offered for the ambiguity played an important role in the results. For example, when the range of probabilities associated with an ambiguous treatment was attributed to the fact that different studies yield different results, participants tended to show ambiguity aversion or indifference. However, when the range was attributed to something that participants could control (e.g., regular application of a cream) or something about which they were overoptimistic (e.g., their immune system function), participants tended to show ambiguity seeking. Health professionals should be mindful of how people will interpret and use information about ambiguity when choosing among treatments.