Leader‐driven distortion of probability and payoff information affects choices between risky prospects

Abstract

AbstractResearch indicating that decision makers often distort new information to favor nascent preferences has focused primarily on riskless choice rather than risky choice. In addition, the critical assumption that information distortion mediates the link between the initially preferred alternative and the final choice has not been tested in a compelling manner. In an experiment designed to fill these gaps, participants made six choices involving pairs of hypothetical three‐outcome monetary gambles. We manipulated initial preferences by varying the order in which gamble features were presented. Multilevel regressions indicated that participants distorted their evaluations of precise probabilities and payoffs in the direction of their emerging preferences and that they used their biased evaluations to update those preferences. As expected, information distortion mediated the effect of initial preferences on final choices and final preference strength. In a follow‐up experiment, we compared a standard measure of information distortion (based on comparisons to mean ratings in a no‐choice control task) to a more personalized measure (based on participants' own ratings in the control task) and found the mean‐based measure to be superior for the probability and payoff information in question. Other findings in Experiment 2 corroborated the results of Experiment 1. In both studies, the distortion of quantitative inputs in a simple task highlights the non‐normative circularity of the choice process. Copyright © 2010 John Wiley & Sons, Ltd.