Complexity aversion in risky choices and valuations: Moderators and possible causes

In the age of digitalization and globalization, an abundance of information is available, and our decision environments have become increasingly complex. However, it remains unclear under what circumstances complexity affects risk taking. In two experiments with monetary lotteries (one with a stratified national sample), we investigate behavioral effects and provide a cognitive explanation for the impact of complexity on risk taking. Results show that complexity, defined as the number of possible outcomes of a risky lottery, decreased the choice probability of an option but had a smaller and less consistent effect when evaluating lotteries independently. Importantly, choices of participants who spent more time looking at the complex option were less affected by complexity. A tendency to avoid cognitive effort can explain these effects, as the effort associated with evaluating the complex option can be sidestepped in choice tasks, but less so in valuation tasks. Further, the effect of complexity on valuations was influenced by individual differences in cognitive ability, such that people with higher cognitive ability showed less complexity aversion. Together, the results show that the impact of complexity on risk taking depends on both, decision format and individual differences and we discuss cognitive processes that could give rise to these effects

Psychophysiological arousal and inter- and intraindividual differences in risk-sensitive decision making.

This is the final version of the article. It first appeared from Wiley via http://dx.doi.org/10.1111/psyp.12627The current study assessed peripheral responses during decision making under explicit risk, and tested whether intraindividual variability in choice behavior can be explained by fluctuations in peripheral arousal. Electrodermal activity (EDA) and heart rate (HR) were monitored in healthy volunteers (N = 68) during the Roulette Betting Task. In this task, participants were presented with risky gambles to bet on, with the chances of winning varying across trials. Hierarchical Bayesian analyses demonstrated that EDA and HR acceleration responses during the decision phase were sensitive to the chances of winning. Interindividual differences in this peripheral reactivity during risky decision making were related to trait sensitivity to punishment and trait sensitivity to reward. Moreover, trial-by-trial variation in EDA and HR acceleration responses predicted a small portion of intraindividual variability in betting choices. Our results show that psychophysiological responses are sensitive to explicit risk and can help explain intraindividual heterogeneity in choice behavior.This work was completed within the Behavioural and Clinical Neuroscience Institute, supported by a consortium award from the Medical Research Council and Wellcome Trust. The Centre for Gambling Research at UBC is supported by funding from the British Columbia Lottery Corporation and the Province of British Columbia government

What's in a sample? Epistemic uncertainty and metacognitive awareness in risk taking

In a fundamentally uncertain world, sound information processing is a prerequisite for effective behavior. Given that information processing is subject to inevitable cognitive imprecision, decision makers should adapt to this imprecision and to the resulting epistemic uncertainty when taking risks. We tested this metacognitive ability in two experiments in which participants estimated the expected value of different number distributions from sequential samples and then bet on their own estimation accuracy. Results show that estimates were imprecise, and this imprecision increased with higher distributional standard deviations. Importantly, participants adapted their risk-taking behavior to this imprecision and hence deviated from the predictions of Bayesian models of uncertainty that assume perfect integration of information. To explain these results, we developed a computational model that combines Bayesian updating with a metacognitive awareness of cognitive imprecision in the integration of information. Modeling results were robust to the inclusion of an empirical measure of participants' perceived variability. In sum, we show that cognitive imprecision is crucial to understanding risk taking in decisions from experience. The results further demonstrate the importance of metacognitive awareness as a cognitive building block for adaptive behavior under (partial) uncertainty. [Abstract copyright: Copyright © 2024 The Author(s). Published by Elsevier Inc. All rights reserved.

A hierarchical Bayesian model of the influence of run length on sequential predictions

Two models of how people predict the next outcome in a sequence of binary events were developed and compared on the basis of gambling data from a lab experiment using hierarchical Bayesian techniques. The results from a student sample (N = 39) indicated that a model that considers run length ("drift model”)—that is, how often the same event has previously occurred in a row—provided a better description of the data than did a stationary model taking only the immediately prior event into account. Both, expectation of negative and of positive recency was observed, and these tendencies mostly grew stronger with run length. For some individuals, however, the relationship was reversed, leading to a qualitative shift from expecting positive recency for short runs to expecting negative recency for long runs. Both patterns could be accounted for by the drift model but not the stationary model. The results highlight the importance of applying hierarchical analyses that provide both group- and individual-level estimates. Further extensions and applications of the approach in the context of the prediction literature are discussed

Change and status quo in decisions with defaults: The effect of incidental emotions depends on the type of default

Affective states can change how people react to measures aimed at influencing their decisions such as providing a default option. Previous research has shown that when defaults maintain the status quo positive mood increases reliance on the default and negative mood decreases it. Similarly, it has been demonstrated that positive mood enhances the preference for inaction. We extend this research by investigating how mood states influence reliance on the default if the default leads to a change, thus pitting preference for status quo against a preference for inaction. Specifically, we tested in an online study how happiness and sadness influenced reliance on two types of default (1) a default maintaining status quo and (2) a default inducing change. Our results suggest that the effect of emotions depends on the type of default: people in a happy mood were more likely than sad people to follow a default when it maintained status quo but less likely to follow a default when it introduced change. These results are in line with mood maintenance theory

Valuation and estimation from experience

The processing of sequentially presented numerical information is a prerequisite for decisions from experience, where people learn about potential outcomes and their associated probabilities and then make choices between gambles. Little is known, however, about how people's preference for choosing a gamble is affected by how they perceive and process numerical information. To address this, we conducted a series of experiments wherein participants repeatedly sampled numbers from continuous outcome distributions. They were incentivized either to estimate the means of the numbers or to state their minimum selling prices to forgo a consequential draw from the distributions (i.e., the certainty equivalents or valuations). We found that participants valued distributions below their means, valued high-variance sequences lower than low-variance sequences, and valued left-skewed sequences lower than right-skewed sequences. Though less pronounced, similar patterns occurred in the mean estimation task where preferences should not play a role. These results are not consistent with prior findings in decision from experience such as the overweighting of high numbers and the underweighting of rare events. Rather, the qualitative effects, as well as the similarity of effects in valuation and estimation, are consistent with the assumption that people process numbers on a compressed mental number line in valuations from experience

The neuropsychology of consumer behavior and marketing

Insights and tools from neuroscience are of great value to marketers. Neuroscientific techniques allow consumer researchers to understand the fundamental neural underpinnings of psychological processes that drive consumer behavior, and elucidate the “black box” that is the consumer’s mind. In the following review, we provide an overview of the fundamental tenets of consumer neuroscience, selectively outline key areas of marketing that consumer neuroscience has contributed to, compare and contrast neuroscientific tools and methods, and discuss future directions for neurophysiological work in marketing. In doing so, we illustrate the broad substantive landscape that neuroscience can add value to within marketing.Peer Reviewedhttps://deepblue.lib.umich.edu/bitstream/2027.42/141563/1/arcp1006.pdfhttps://deepblue.lib.umich.edu/bitstream/2027.42/141563/2/arcp1006_am.pd

The effect of having too much choice

Die vorliegende Dissertation beschäftigt sich mit dem so genannten „Effekt zu großer Auswahl“. Der Effekt besagt, dass ein Überangebot von Auswahlalternativen negative Konsequenzen hat, in dem es beispielsweise die Motivation verringert, überhaupt eine Entscheidung zu treffen oder in dem es die subjektive Zufriedenheit mit der letztlich gewählten Alternative verringert. Die theoretischen Erklärung es Effektes sind jedoch bisher nur unzureichend präzisiert. Der Effekt steht im Widerspruch zu Axiomen der klassischen rationalen Entscheidungstheorie. Ein sicherer Nachweis des Effektes hätte daher Konsequenzen für die Theorienbildung in der Psychologie. Außerdem hätte der Effekt praktische Relevanz in angewandten Bereichen wie zum Beispiel im Konsumgütermarketing oder in der Politik. In der vorliegenden Arbeit wird zunächst der Versuch unternommen, bereits publizierte Studien zu replizieren, in denen große Effektstärken gefunden wurden. In einer Serie von insgesamt drei Replikationen mit insgesamt 850 Versuchsteilnehmern ließ sich jedoch der Effekt zu großer Auswahl nicht replizieren. Der Effekt scheint demnach weniger generalisierbar als bisher angenommen und sein Auftreten hängt vermutlich von spezifischen Randbedingungen ab. Die Arbeit widmet sich im weiteren der Frage wann, wieso und unter welchen Randbedingungen ein Effekt zu großer Auswahl zu erwarten ist. Dabei eine Reihe potenzieller Randbedingungen theoretisch begründet und in sechs weiteren Experimententen mit insgesamt 595 Teilnehmern getestet. Im Ergebnis können die meisten der getesteten Randbedingungen als Erklärung für das Auftreten des Effektes ausgeschlossen werden. Eine sich daran anschließende Meta-Analyse zeigt jedoch, dass der Unterschied zwischen Studien die einen Effekt nachweisen und solchen, in denen kein Effekt auftritt, vermutlich nicht allein durch Zufallsprozesse erklärbar ist. Demnach ist eine Suche nach weiteren Randbedingungen in zukünftiger Forschung gerechtfertigt.teste diese in sechs weiteren Experimententen mit insgesamt 595 Teilnehmern. Basierend auf den Ergebnissen dieser Experimente können die meisten der getesteten Randbedingungen als Erklärung für das Auftreten des Effektes ausgeschlossen werden. Die Ergebnisse einer sich daran anschließenden Meta-Analyse veröffentlichter und unveröffentlichter Daten zeigt jedoch, dass der Unterschied zwischen Studien die einen Effekt nachweisen und solchen, in denen kein Effekt auftritt, vermutlich nicht allein durch Zufallsprozesse erklärbar ist. Demnach ist eine Suche nach weiteren Randbedingungen in zukünftiger Forschung gerechtfertigt.This dissertation explores the so-called too-much-choice effect, according to which an overabundance of options eventually leads to negative consequences, such as a diminished motivation to choose any of them or a decreased satisfaction with the finally chosen alternative. While strong instances of this effect have been found in a small number of studies in the past, its theoretical underpinnings are still unspecific. Because the effect challenges basic axioms of rational choice theory and it also has important implications for applied fields such as marketing and public policy making, it is important to get a better understanding of the mechanisms that lead to the effect. As a starting point to test these mechanisms, an experimental paradigm is needed in which the effect reliably occurs. Therefore, I first strived to replicate previous experiments that reported large effect sizes. Yet in a series of three replications in the field and in the lab with a total of 850 participants, I did not find an effect of too much choice, suggesting that the effect is less robust than previously thought and that it depends on certain boundary conditions instead. To find out which specific conditions are necessary to reliably elicit it, I subsequently examined several boundary conditions in a series of six laboratory experiments. Based on the results of these experiments with a total of 595 participants, most of the tested boundary conditions could be ruled out as explanations of why and when the effect of too much choice occurs. The results of a meta-analysis of published and unpublished data including my own suggest that the effect of too much choice is smaller than previously thought and that the differences between the studies that found the effect and those that did not cannot be explained by mere chance. As a consequence, a further search for moderator variables in future research seems justified

Money does not stink: Using unpleasant odors as stimulus material changes risky decision making

Odors are strong elicitors of affect, and they play an important role in guiding human behavior, such as avoiding fire or spoiled food. However, little is known about how risky decision making changes when stimuli are olfactory. We investigated this question in an experimental study of risky decision making with unpleasant odors and monetary losses in a fully incentivized task with real outcomes. Odor and monetary decisions were matched so that monetary losses corresponded to the amount of money participants were willing to pay to avoid smelling an odor. Hierarchical Bayesian analyses using prospect theory show that participants were less sensitive to probabilities when gambling with odors than when gambling with money. These results highlight the importance of taking the sensory modality into account when studying risky decision making