Tactical and strategic responsiveness in a competitive risk-taking game

Abstract

Two exploratory studies assessed subjects' risk preferences in a series of dynamic, competitive games with real payoffs. The objective was to determine whether people adapt their risk preferences to (1) short-run, or tactical, task demands (i.e., whether one is currently winning or losing), and (2) long-run, or strategic, demands imposed by the structure of the task (i.e., whether one is playing offense or defense). We also wanted to learn whether (3) subjects who adapt their preferences perform better than subjects who do not adapt. Most subjects in both experiments were tactically responsive, and winners were somewhat more tactically responsive than losers. Evidence for strategic responsiveness was much weaker. Although the instructions and the payoff scheme both suggested the need for greater risk taking on offense than on defense, many Experiment 1 subjects took equal or greater risk on defense than on offense. In Experiment 2, monetary penalties for lost games were eliminated and more strategic responsiveness occurred. Possible determinants of whether tactical and/or strategic responsiveness occurs in a task are outlined.