Abstract
People choose differently when facing potential gains than when facing potential losses. Clear gross differences in decision making between gains and losses have been empirically demonstrated in numerous studies (e.g., framing effect, risk preference, loss aversion). However, theories maintain that there are strong underlying connections (e.g., reflection effect). We investigated the relationship between gains and losses decision making, examining risk preferences, and choice strategies (the reliance on option information) using a monetary gamble task with interleaved trials. For risk preferences, participants were on average risk averse in the gains domain and risk neutral/seeking in the losses domain. We specifically tested for a theoretically hypothesized correlation between individual risk preferences across the gains and losses domains (the reflection effect), but found no significant relationship in the predicted direction. Interestingly, despite the lack of reflected risk preferences, cross-domain risk preferences were still informative of individual choice behavior. For choice strategies, in both domains participants relied more heavily on the maximizing strategy than the satisficing strategy, with increased reliance on the maximizing strategy in the losses domain. Additionally, while there is no mathematical reliance between the risk preference and strategy metrics, within both domains there were significant relationships between risk preferences and strategies—the more participants relied upon the maximizing strategy the more risk neutral they were (equating value and utility maximization). These results demonstrate the complexity of gains and losses decision making, indicating the apparent contradiction that their underlying cognitive/neural processes are both dissociable and overlapping.
Highlights
The purpose of decision making is to select the best possible outcome
We found that on average, response time were longer for trials in the losses domain [mean of individual medians ± standard deviation. *For response times (SD) difference = 0.89 ± 0.54 s, gains = 1.90 ± 0.68 s, losses = 2.79 ± 1.00 s; t(103) = 16.58, p < 0.0001, Cohen’s d = 1.04]
Utilizing the risk premium metric, we found no significant relationship across risk preferences across domains [χ2(1) = 2.52, p = 0.11], with only 52.9% of the participants showing the pattern of preferences predicted by the reflection effect, indicating no significant relationship between risk preferences across domains
Summary
The purpose of decision making is to select the best possible outcome. Broadly, decision making can be divided into two overlapping types—those with potential gains and those with potential losses. Individuals are considered on average risk averse for gains (prefer smaller certain rewards to larger uncertain rewards) and risk seeking for losses (prefer a larger possible loss over a smaller certain loss; Kahneman and Tversky, 1979) This pattern of inverted preferences over the gains and losses domains is called the reflection effect, and has been suggested to derive from risk preferences arising from each individual having a common degree of diminishing weight of marginal utility across both gains and losses. While multiple studies have suggested that gains and losses value signals may be encoded in the ventromedial prefrontal cortex (vmPFC; Tom et al, 2007; Levy and Glimcher, 2012), a recent meta-analysis of over 200 studies found evidence that the vmPFC may only encode gains (Bartra et al, 2013) Such ample evidence shows clear differences between choice behaviors and neural responses in the gains and losses domains, it remains unclear what cognitive processes/neural mechanisms drives these differences. We examined the predictive power of cross-domain risk preferences on choice behavior and the interrelationship between risk preferences and choice strategies within and across the gains and losses domains
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