The Persistence of Common-Ratio Effects in Multiple-Play Decisions

People often make more rational choices between monetary prospects when their choices will be played out many times rather than just once. For example, previous research has shown that the certainty effect and the possibility effect (two common-ratio effects that violate expected utility theory) are eliminated in multiple-play decisions. This finding is challenged by seven new studies (N = 2391) and two small meta-analyses. Results indicate that, on average, certainty and possibility effects are reduced but not eliminated in multiple-play decisions. Moreover, in our within-participants studies, the certainty and possibility choice patterns almost always remained the modal or majority patterns. Our primary results were not reliably affected by prompts that encouraged a long-run perspective, by participants’ insight into long-run payoffs, or by participants’ numeracy. The persistence of common-ratio effects suggests that the oft-cited benefits of multiple plays for the rationality of decision makers’ choices may be smaller than previously realized

The Persistence of Common-Ratio Effects in Multiple-Play Decisions

People often make more rational choices between monetary prospects when their choices will be played out many times rather than just once. For example, previous research has shown that the certainty effect and the possibility effect (two common-ratio effects that violate expected utility theory) are eliminated in multiple-play decisions. This finding is challenged by seven new studies (N = 2391) and two small meta-analyses. Results indicate that, on average, certainty and possibility effects are reduced but not eliminated in multiple-play decisions. Moreover, in our within-participants studies, the certainty and possibility choice patterns almost always remained the modal or majority patterns. Our primary results were not reliably affected by prompts that encouraged a long-run perspective, by participants’ insight into long-run payoffs, or by participants’ numeracy. The persistence of common-ratio effects suggests that the oft-cited benefits of multiple plays for the rationality of decision makers’ choices may be smaller than previously realized

System 1 Is Not Scope Insensitive

Companies can create value by differentiating their products and services along quantitative attributes. Existing research suggests that consumers’ tendency to rely on relatively effortless and affect-based processes reduces their sensitivity to the scope of quantitative attributes and that this explains why increments along quantitative attributes often have diminishing marginal value. The current article sheds new light on how “system 1” processes moderate the effect of quantitative product attributes on subjective value. Seven studies provide evidence that system 1 processes can produce diminishing marginal value, but also increasing marginal value, or any combination of the two, depending on the composition of the choice set. This is because system 1 processes facilitate ordinal comparisons (e.g., 256 GB is more than 128 GB, which is more than 64 GB) while system 2 processes, which are relatively more effortful and calculation based, facilitate cardinal comparisons (e.g., the difference between 256 and 128 GB is twice as large as between 128 and 64 GB)