Risky choice decision-making: the role of contextual factors and individual differences

Abstract

Decision-making is one of mankind's most important recurrent activities which precedes all voluntary behaviour. Real-world decisions typically take place in ill-structured environments in which risk and time pressure are two key contextual factors. As individual differences are the underlying cause of human behaviour, logic ability and expertise may influence decisionmaking and attenuate the effect of contextual factors. Therefore, a three-study research program was undertaken to examine the influence of these key factors on decision process and decision outcome. In Study 1, 54 participants engaged in a semi-familiar task in a simulated micro-world. Risk and time pressure were manipulated. In addition, a probabilistic decision aid was available during a proportion of trials. Deductive logic ability was also assessed. In Study 2, 84 participants (novices, journeymen and experts) undertook the same tasks to examine the influence of general or non-domain-specific decision-making expertise. In Study 3, 62 participants (novices, journeymen and experts) completed a familiar task to examine the influence of domain-specific decision-making expertise. The domain selected for study was Australia's wine industry. Despite a dazzling track record as a successful business sector nationally and internationally, little research has been conducted on the decisionmaking skills of its operators. Therefore, participants completed an original cognitive ability test, The Australian Wine Growers and Makers' Decision Questionnaire© (A WGMDQ©/ (O'Hare, 2005) in which risk and time pressure were manipulated. Psychometric analyses revealed that the AWGMDQ© is a reliable and valid measure of risky decision-making. Therefore, inferences derived from its scores are meaningful. Deductive logic ability was also assessed. In Studies 1 and 2, a significant interaction between risk and time pressure was found. Specifically, when risk was elevated, time pressure did not appreciably affect decision process or decision outcome. Conversely, when risk was low, time pressure induced a conservative decision process and impaired decision outcome. In Study 3, an identical pattern was observed for decision outcome. For both the semi-familiar and familiar task, experts' decision outcome was unaffected by the interaction of risk and time pressure. However, in all three studies, the effect of contextual factors on decision outcome depended on deductive logic ability. Deductive logic ability was associated with superior outcomes overall and whenever risk and/or time pressure were high, possibly by promoting analysis and information processing speed. In Study 3, an original Five Factor Decision Process Modef2 (0 'Hare, 2005) - comprising memory, analytical, learning, intuitive and creative decision processes -predicted successful decision outcomes. The model was also sensitive to context, in which the corifiguration of significant processes within the model differed according to the level of risk and/or time pressure. In addition to capturing the decision processes used by wine industry personnel, the model effectively portrayed those of novices, journeymen and experts. Theoretically, these results extend the traditional dual processing paradigm prevalent in decision-making research, provide insight into the function and structure of logic and present a systematic examination of risk and time pressure.