Attentional Selection Mediates Framing and Risk-Bias Effects

Research in Experimental Economics, 2008

Journal of Behavioral Decision Making, 2008

We show that preferences depend on the attributes that can be directly manipulated when people need to integrate multiple sources of information because direct manipulation causes focusing bias. This effect appears even when all relevant information is simultaneously and explicitly presented at the time the decisions are made. Participants decided how much to save, what investment risk to take and observed the future financial consequences in terms of the mean and variability of the expected retirement income. Participants who manipulated only the future income distribution saved more and took less risk. This effect disappears when the risk-related variables are removed, which indicates that task complexity is a mediator of such focusing effects. A more balanced trade-off between the choice attributes was selected when all attributes were manipulated. However, when there is a dichotomy between manipulating versus observing choice attributes, then decisions were based mostly on the manipulated attributes. Copyright © 2008 John Wiley & Sons, Ltd.

We contrast two classes of choice processes, those assuming time-consuming comparisons and those where stimuli for each option act independently, competing for expression by cross censorship. The Sequential Choice Model (SCM) belongs in the latter category, and has received empirical support in several procedures involving deterministic alternatives. Here we test this model in risky choices. In two treatments, each with five conditions, European starlings (Sturnus vulgaris) faced choices between options with unpredictable outcomes and risk-free alternatives. In the delay treatment the five conditions involved choices between a variable option offering two equiprobable delays to reward and a fixed option with delay differing between conditions. The amount treatment was structurally similar, but amount of reward rather than delay was manipulated. As assumed (and required) by the SCM, latency to respond in no-choice trials reflected each option's richness with respect to the background alternatives, and, crucially, preferences in simultaneous choices were predictable from latencies to each option in forced trials. However, we did not detect reliable differences in response times between forced and choice trials, neither the lengthening expected from evaluation models nor the shortening expected from the SCM.

Models and Experiments in Risk and Rationality, 1994

In view of the considerable evidence of systematic violations of expected utility by individual subjects, a number of alternative models generalizing expected utility have been developed. As P.Fishburn put it once [ ] 1988 , we have entered "a new era" in the domain of decision under risk, but "we shall have to wait and see"

Rationality and Society, 1996

We receive helpful comments from seminar participants at CIRANO (Montréal) and LAMIA (Paris).

Annals of the New York Academy of Sciences, 2006

Organizational Behavior and Human Decision Processes, 1999

A meta-analysis of Asian-disease-like studies is presented to identify the factors which determine risk preference. First the confoundings between probability levels, payoffs, and framing conditions are clarified in a task analysis. Then the role of framing, reflection, probability, type, and size of payoff is evaluated in a meta-analysis. It is shown that bidirectional framing effects exist for gains and for losses. Presenting outcomes as gains tends to induce risk aversion, while presenting outcomes as losses tends to induce risk seeking. Risk preference is also shown to depend on the size of the payoffs, on the probability levels, and on the type of good at stake (money/property vs human lives). In general, higher payoffs lead to increasing risk aversion. Higher probabilities lead to increasing risk aversion for gains and to increasing risk seeking for losses. These findings are confirmed by a subsequent empirical test. Shortcomings of existing formal theories, such as prospect theory, cumulative prospect theory, venture theory, and Markowitz's utility theory, are identified. It is shown that it is not probabilities or payoffs, but the framing condition, which explains most variance. These findings are interpreted as showing that no linear combination of formally relevant predictors is sufficient to capture the essence of the framing phenomenon.

2017

What should you do when confronting a sequence of decisions such that you make some choices and chance makes some others, i.e., a dynamic decision making problem under risk? Standard economic rationality requires you to look at the final choices, determine the preferred options, choose the sequence of decisions that lead to those and follow that sequence through to the end. That behaviour is implied by the conjunction of the principles of separability, dynamic consistency and reduction of compound lotteries. Experimental research on these dynamic choice principles has been developed within the common ratio effect theoretical framework. This paper experimentally investigates what subjects do when confronting such a problem within a new theoretical framework provided by the common consequence effect that manipulates the value of the foregone-consequence in the prior risks.Results suggest that reduction of compound lotteries holds throughout, whilst dynamic consistency and separability...

Management Science, 2007

This experiment tested two behavioral properties of risky decision making, gain-loss separability and coalescing. Cumulative prospect theory (CPT) implies both properties, but the transfer of attention exchange model (TAX) violates both. Original prospect theory satisfies gain-loss separability but may or may not satisfy coalescing, depending on whether editing rules are assumed. A configural form of CPT proposed by Wu and Markle violates gain-loss separability but satisfies coalescing. New tests were designed and conducted to test these theories against specific predictions of a TAX model. This model used parameters estimated from previous data together with simple new assumptions to extend TAX to gambles with negative and mixed consequences. Contrary to all three forms of prospect theory, systematic violations of both coalescing and of gain-loss separability were observed. Violations of GLS were confirmed by analyses of individual data patterns by means of an error model in which each choice can have a different rate of error. Without estimating any parameters from the new data, the TAX model predicted the majority choices in the new data fairly well, correctly predicting when modal choices would violate gain-loss separability, when they would satisfy it, and when indifference would be observed.

2018

The high rewards people desire are typically unlikely—that is, risks and rewards are generally negatively correlated. Here, we investigated whether decision makers rely on ecological links between risks and rewards to simplify how they process risky options. In a learning phase, participants were exposed to options in which risks and rewards werenegatively correlated, positively correlated, or uncorrelated. In a test phase, their eye movements were tracked while they chose from two gambles with an emphasis on making either a fast or the best possible choice. In “best” trials, participants in a negatively correlated risk–reward environment satisficed their evidence accumulation (lower threshold in a drift diffusion model, faster responses, less expected value maximization). This suggests that the decision processes typically studied in the laboratory—almost exclusively using uncorrelated risk–reward environments—may be different than decision processes outside the lab, where a negati...