| Abstract: | In decisions under uncertainty, decision makers confront two uncertainties: the uncertain linkage between actions and outcomes and the uncertain linkage between these outcomes and his or her affective responses to them. The two studies reported here examine affective responses to expected and unexpected outcomes in various settings. In Study 1, a scenario-based laboratory experiment (N = 149), we examined subjects' predicted responses to a range of outcomes, as a function of how surprising the outcome was. Study 2, a field study (N = 127), involved the expectations of bowlers about their scores in an upcoming game and about their responses to various outcomes at, above, and below expectations. We also measured actual affective reactions after the bowlers had completed their games. Findings suggest that subjects both expect and experience a loss-averse, expectation-based value function broadly of the Prospect Theory type. They also anticipate, and experience, an amplifying effect of outcome surprise, though they underestimate its size. We argue that such underestimation, together with overtight prediction ranges, may expose subjects to much larger affective variation with outcome variability than they anticipate. |
