Magnitude and incentives: revisiting the overweighting of extreme events in risky decisions from experience

Konstantinidis, Emmanouil; Taylor, Robert; Newell, Ben R.

doi:10.3758/s13423-017-1383-8

Cited by 21 publications

(24 citation statements)

References 36 publications

(59 reference statements)

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“…The observed relative payout effect is consistent with recent evidence that people overweight outcomes near the edges of an experienced distribution, increasing avoidance of options that could lead to the worst outcome and enhancing attraction to options that could lead to the best outcome (; see for a review). People also showed enhanced recall for the best and worst payouts.…”

Section: Discussionsupporting

confidence: 86%

Effects of winning cues and relative payout on choice between simulated slot machines

2020

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Background and aims Cues associated with winning may encourage gambling. We assessed the effects on risky choice of slot machine of: (1) neutral sounds paired with winning, (2) casino‐related cues (such as the sound of coins dropping and pictures of dollar signs) and (3) relative payouts. Design Experimental studies in which participants repeatedly chose between safer and riskier simulated slot machines. Safer slot machines paid the same amount regardless of which symbols lined up. Risky machines paid different amounts depending on which symbols lined up. Effects of initially neutral sounds paired with the best payout were assessed between‐groups (experiment 1a) and within‐participants (experiment 1b). In experiment 2, pairing of casino‐related audiovisual cues with payout was assessed within participants, and cue timing was assessed between groups. Setting A university research laboratory in Edmonton, Canada. Participants Undergraduate students (n = 630 across three experiments). Measurements Preference for riskier over safer machines, preference between machines that differed in cues, payout recall and frequency estimates for payouts. Risky choice was calculated as the proportion of choices of the risky machine when presented with a fixed machine of the same expected value. Findings In experiment 1a, risky choice was slightly increased by pairing a sound with the best payout compared with pairing the sound with a lower payout (P = 0.04, d = 0.28) but not compared with no sound [P = 0.36, d = 0.13, Bayes factors (BF)10 = 0.22]. In experiment 1b, people did not prefer a machine with a best‐payout sound over one with a lower‐payout sound (P = 0.67, d = 0.03, BF10 = 0.11). Relative payout affected choice: risky choices were higher for high‐ than low‐payout decisions (P < 0.001, d = 0.53). In experiment 2, people preferred machines with casino‐related cues paired with winning (P < 0.001, r2 = 0.11) and cue timing (at choice or concurrently with the win) had no effect (P = 0.95, r2 = 0.0, BF10 = 0.05). Casino‐related cues also enhanced payout memory (P = 0.013 and 0.006). Cue effects were not specific to risk: people also preferred fixed‐payout machines with casino‐related cues (P < 0.001, r2 = 0.16). Conclusions In a gambling simulation, student participants chose more risky slot machines when payouts were relatively higher and when casino‐related cues were associated with payouts. Pairing a neutral sound with the best payout did not consistently affect slot machine choice, and the effect of casino cues did not depend on their timing. Casino‐related cues enhanced payout memory.

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Section: Discussionsupporting

confidence: 86%

Effects of winning cues and relative payout on choice between simulated slot machines

2020

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“…In contrast, faster adaptation in the decreasing condition may be due to strong recency effects (Avrahami et al, 2016), where most recent experiences help participants realize a decrease in the frequency of the best outcome, which may increase the exploration of the safe option. The slight emergent preference for the safe option in the static condition is consistent with diminishing sensitivity and risk aversion in the gains domain, which is consistent with a range of studies in experience-based decision-making (e.g., Erev, Ert, & Yechiam, 2008;Ert & Yechiam, 2010;Konstantinidis, Taylor, & Newell, 2018).…”

Section: Questionnaire On the Awareness Of Changesupporting

confidence: 84%

Patterns of choice adaptation in dynamic risky environments

Konstantinidis¹,

Harman²,

González³

2020

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An important aspect of making good decisions is the ability to adapt to changes in the values of available options. Research suggests that we are poor at changing behavior and adapting our choices successfully. This work contributes to clarifying the role of memory on learning and successful adaptation to changing decision environments. We test the effects of the direction of change and the type of feedback using a decisions from experience binary choice task, where individuals learn the outcomes and their associated probabilities from feedback received after selecting between available choice options. The results revealed a robust effect of the direction of change: risk that becomes more rewarding over time is harder to detect than risk that becomes less rewarding over time; and even with full information about the outcomes of choice options people showed sub-optimal adaptation to change. We rely on three distinct computational models to interpret the role of memory on learning and adaptation. The distributions of individual model parameters were analyzed in relation to participants' ability to successfully adapt to the changing conditions of the various decision environments. Consistent across the three models and two distinct data sets (our experimental data and other researchers' data), results revealed the value of recency as an individual memory component for choice adaptation. Individuals relying more on recent experiences were more successful at adapting to change, regardless of the direction of change. We explain the value and limitations of these findings as well as opportunities for future research.

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“…Experience-based risky choices are also influenced by the set of available values in a decision context. When making decisions based on experience, people tend to be more risk seeking for relative gains than losses-the opposite of decisions made from explicit descriptions (e.g., Ludvig & Spetch, 2011;Kahneman & Tversky, 1979;Konstantinidis, et al, 2018;Wulff et al, 2018). This pattern of experienced-based risky choice appears to be driven by overweighting of the most extreme (best and worst) outcomes in the decision context (Ludvig et al, 2014(Ludvig et al, , 2018.…”

Section: Introductionmentioning

confidence: 99%

Encoding context determines risky choice

Madan¹,

Machado²,

Mason³

et al. 2017

Preprint

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Both memory and choice are influenced by context: Memory is enhanced when encoding and retrieval contexts match, and choice is swayed by available options. Here, we assessed how context influences risky choice in an experience-based task. Within a single session, we created two separate contexts by presenting blocks of trials in distinct backgrounds. Risky choices were context-dependent; given the same choice, people chose differently depending on other outcomes experienced in that context. Choices reflected an overweighting of the most extreme outcomes within each local context, rather than the global context of all outcomes. When tested in the non-trained context, people chose according to the context at encoding and not retrieval. In subsequent memory tests, people displayed biases specific to distinct contexts: extreme outcomes from each context were more accessible and judged as more frequent. These results pose a challenge for theories of choice that rely on retrieval as guiding choice.

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Magnitude and incentives: revisiting the overweighting of extreme events in risky decisions from experience

Cited by 21 publications

References 36 publications

Effects of winning cues and relative payout on choice between simulated slot machines

Effects of winning cues and relative payout on choice between simulated slot machines

Patterns of choice adaptation in dynamic risky environments

Encoding context determines risky choice

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