Risky business: Effects of stress on risky decision making

Abstract

Decision-making under risk differs for potential gains compared to potential losses. The discrepancy in how gains and losses are assessed is best described by cumulative prospect theory, which postulates that individual risk attitude is more risk seeking in the face of potential losses (i.e., gambling to avoid a loss), more risk averse in the face of potential gains (i.e., opting for a smaller, more secure payout), and more likely to overweight low-probability events (e.g., buying a lottery ticket). Stress is known to modulate decision-making; however, how stress affects individual parameters of risk attitude remains unclear. Participants randomly assigned to the stress condition completed a Zoom-adapted Trier Social Stress Test, and those assigned to the control condition completed a corresponding control task. Participants then completed a task designed to estimate cumulative prospect theory parameters of risky decision-making through a series of gambles. Bayesian hierarchical modeling was used to estimate individual preferences for risk aversion, loss aversion, and probability distortion. Stressed participants exhibited less risk averse behaviors than control participants, with their behavior approaching risk-neutral, p=0.019. Additionally, stressed participants had increased probability distortion than control participants, indicating more overweighting of extreme events, p=.005 Stressed participants were also less loss averse than control participants, p<.001. We found that stress altered risk attitudes by altering risk aversion, probability distortion, and loss aversion. By understanding which domains of risk attitude are altered by stress, better therapeutic practices can be developed to aid individuals make better decisions while under stress.