Risky Decisions Research Articles

Risky behavior in virtual reality: The roles of personality, environment, and physiology.

Virtual reality (VR) provides a unique opportunity to simulate various environments, enabling the observation of human behavior in a manner that closely resembles real-world scenarios. This study aimed to explore the effects of anticipating reward or punishment, personality traits, and physiological arousal on risky decision-making within a VR context. A custom VR game was developed to simulate real-life experiences. The sample comprised 52 students (63.46% female) from the University of Novi Sad, Serbia. The study assessed four parameters within the VR environment: elapsed game time, number of steps taken, average score, and decision-making time. Three physiological signals, heart rate, skin conductance, and respiratory rate, were recorded. Results indicated that personality traits, specifically Fight (β = -0.33, p = 0.024) and Freeze (β = 0.431, p = 0.009), were significantly related to behavior in the VR environment (R = 0.572, R2_adj = 0.227, RMSE = 23.12, F(6, 40) = 3.25, p = 0.011). However, these effects were not significant after negative feedback. Emotional arousal, measured by respiratory rate amplitude (β = 0.276, p = 0.045), showed a more pronounced role after feedback (β = 0.337, p = 0.028). These findings indicate that personality traits primarily influence behavior in a VR environment prior to the actual threat, whereas environmental characteristics become more important afterwards. The results offer valuable insights for experimental and personality psychologists by revealing how risk-taking is influenced by situational, emotional, and personality factors. Additionally, they provide guidance for VR designers in creating more ecologically valid environments, highlighting VR's potential as a tool for psychological research, while also underscoring the critical importance of selecting objective VR measures to accurately capture the complexities of human behavior in immersive environments.

Deconstructing Temporal Stages of Prosocial and Antisocial Risky Decision-making in Adolescence.

Risk-taking is a prominent aspect of adolescent behavior. A recent neurodevelopmental model suggests that this trait could influence prosocial and antisocial decision-making, proposing a new category known as prosocial and antisocial risk-taking. The primary objective of this study was to examine the electrophysiological underpinnings of prosocial and antisocial risk-taking in adolescence, a developmental period characterized by elevated risky, prosocial, and antisocial decisions. To this end, 32 adolescents aged 13-19 years completed a modified dictator game to choose between three options, representing prosocial and antisocial risk-taking constructs and a risk-free fair one. At the behavioral level, adolescents favored antisocial risky decisions over prosocial risky ones. ERP results at the electrophysiological level in the response selection stage demonstrated that decision preceding negativity was more negative-going before making prosocial risky decisions than other decisions. During the feedback evaluation stage, feedback-related negativity was the least negative after selecting the antisocial risky option and receiving successful feedback. However, choosing the fair option and receiving neutral feedback resulted in the most negative feedback-related negativity. Moreover, P300 showed the most positive mean amplitude following the selection of the antisocial risky option and facing successful feedback, with the lowest positive amplitude observed after choosing the fair option and encountering neutral feedback. These results underscore the distinct electrophysiological underpinnings associated with prosocial and antisocial decisions involving risks.

Extending the Theory of Planned Behavior (TPB) by Examining the Decision-making Process of Individuals Starting a New Business: A Quantitative Analysis in Germany

Starting a new business is a risky and complex decision with widespread consequences for the entrepreneur. But despite extensive research, it is still not clear which specific factors influence this choice on the individual level of the entrepreneur. Using the Theory of Planned Behavior (TPB) as a theoretical basis for the decision process, this study builds on previous qualitative research to shed more light on the social and personal factors determining the individual’s decision to start a new business. Following a quantitative approach, data were collected via an online survey targeting entrepreneurs, resulting in 176 complete responses. The findings highlight that an economically oriented education significantly influences entrepreneurial attitudes, materialistic values are linked with subjective norms, and the individual’s resilience positively affects perceived behavioral control (PBC). On the other hand, no influence on the decision was found for factors such as social influence, need for recognition, educational level, conscientiousness, and openness. Based on these findings, the study has two core contributions: First, it contributes to the refinement of TPB in the context of entrepreneurship by highlighting the individual’s social and personal factors. Second, it provides valuable insights for educational initiatives and political decisions to foster entrepreneurial endeavors.

Acute stress differentially influences risky decision-making processes by sex: A hierarchical bayesian analysis.

How does stress influence our decision-making? Although numerous studies have attempted to answer this question, their results have been inconsistent-presumably due to methodological heterogeneity. Drawing on cumulative prospect theory, we examined how acute stress influenced risky decision-making. To this end, we randomly assigned 147 participants to an acute stress induction or control condition and subsequently assessed participants' risky decision-making. We found that stress increased risky decision-making overall, but more importantly, that stress exerted multiple effects on risky decision-making processes that differed between male and female participants. For female participants, relative to the control condition, stress produced a pattern of decision-making characterized by risk seeking with respect to gains, slightly reduced loss aversion, accurate outcome probability assessment, and greater choice stochasticity. For male participants, stress, relative to the control condition, produced to a pattern of decision-making characterized by very low loss aversion and poorer outcome probability assessment. These results suggest that some of the heterogeneity in existing literature may be explainable by task differences in risk type, risk amount, and outcome certainties, and further that these effects will differ by sex. In short, stress changes how we make decisions, and it does so differently by sex.

Effects of maternal separation on punishment-driven risky decision making in adolescence and adulthood.

Early life adversity (ELA) is associated with a multitude of neural and behavioral aberrations. To develop treatments to mitigate the effects of ELA, it is critical to determine which aspects of cognition are affected and when these disturbances manifest across the lifespan. Here, we tested the effects of maternal separation, an established rodent model of ELA, on punishment-driven risky decision-making longitudinally in both adolescence (25-55days old) and adulthood (80-100days old). Risk-taking was assessed with the Risky Decision-making Task, wherein rats choose between a small, safe reward and a large reward accompanied by an escalating risk of punishment (foot shock). We observed that rats exposed to maternal separation were more prone to risk-taking than controls during adolescence, and demonstrated reduced latency to make both risky and safe decisions. Interestingly, this augmented risk-taking was no longer evident in adulthood. Males and females displayed comparable levels of risk-taking during adolescence then diverged in adulthood, with adult males displaying a sharp increase in risk-taking. Finally, we observed that risk-taking changed across the lifespan in rats exposed to maternal separation, but not in control rats. Collectively, these data reveal that ELA engenders risk-taking in adolescence but not adulthood, and that sex differences in risky decision-making are not evident until adulthood. This has important implications for the development of both behavioral and biological treatments to improve decision-making during the vulnerable adolescent period.

Relationship between (under)confidence and prospect theory in risky decisions: Challenges for financial literacy policies

Relationship between (under)confidence and prospect theory in risky decisions: Challenges for financial literacy policies

Trait Anxiety Leads to "Better" Performance? A Study on Acute Stress and Uncertain Decision-Making.

In uncertain situations, individuals seek to maximize rewards while managing risks. Yet, the effects of acute stress and anxiety on decision-making in ambiguous and risky contexts are unclear. This study aims to contribute to the exploration of how acute stress influences sensitivity to immediate vs. delayed rewards, risk management strategies, and the role of anxiety in these processes. This study used the laboratory acute stress induction paradigm to analyze the direction of influence of acute stress on ambiguity decision-making and risky decision-making in males and then used moderating effect analysis to study the impact of anxiety on this process. The results show that a combination of the Socially Evaluated Cold Pressor Test and the Sing-a-Song Stress Test can successfully induce acute stress, which reduces both the proportion of the options selected that represent long-term rewards and risk-adjustment ability. Additionally, trait anxiety had a moderating effect on the influence of stress on ambiguity decision-making. Acute stress reduces focus on long-term rewards while increasing focus on short-term rewards, leading to impulsivity and impaired risk-adjustment. Additionally, to some extent, high trait anxiety scores predict better performance in making decisions under ambiguity during stress.

The joint effect of earnings management and efficiency of cash management on firms’ financial well-being: evidence from Egypt

Purpose This study aims to investigate the association between earnings management and the efficiency of cash management as well as the extent to which this relationship affects a firm’s financial well-being (FWB). Design/methodology/approach Using fixed-effects models and quarterly financial statements of 178 nonfinancial firms, this study analyzes 3,376 firm-quarter observations listed on the Egyptian stock market from 2005 to 2019. Findings The empirical findings suggest that optimal cash holdings and cash holding excess increase with lower real earnings management (REM) of operating activities or higher accrual earnings management (AEM). This relationship positively impacts firms’ FWB but is negatively influenced by REM. Research limitations/implications This study’s findings have two key implications for standards regulators and decision-makers. First, the study reveals the link between opportunistic earnings management and cash management, emphasizing the need for stricter oversight in corporate governance to prevent risky long-term decisions. Furthermore, these findings suggest that regulators, specifically in emerging markets, should proactively develop policies to limit earnings management. Second, this study demonstrates how accounting discretion affects both earnings management and short-term working capital management, underscoring the potential erosion of stakeholders’ confidence when financial statements are misleading. Originality/value This study examines the impact of sales manipulation and overproduction on cash holdings. To the best of the author’s knowledge, this is also the first study to explore how managerial discretion over both earnings and excess cash holdings influences a firm’s FWB. This study provides new empirical evidence of the joint effects of managerial opportunism in earnings and cash management on a firm’s financial health.

Social conformity is a heuristic when individual risky decision-making is disrupted.

When making risky choices in social contexts, humans typically combine social information with individual preferences about the options at stake. It remains unknown how such decisions are made when these preferences are inaccessible or disrupted, as might be the case for individuals confronting novel options or experiencing cognitive impairment. Thus, we examined participants with lesions in insular or dorsal anterior cingulate cortex, key regions implicated in risky decision-making, as they played a gambling task where choices were made both alone and after observing others' choices. Participants in both lesion groups showed disrupted use of standard utility-based computations about risky options. For socially situated decisions, these participants showed increased conformity with the choices of others, independent from social utility-based computations. These findings suggest that in social contexts, following others' choices may be a heuristic for decision-making when utility-based risk processing is disrupted.

Nothing to lose? Neural correlates of decision, anticipation, and feedback in the balloon analog risk task.

Understanding the subprocesses of risky decision making is a prerequisite for understanding (dys-)functional decisions. For the present fMRI study, we designed a novel variant of the balloon-analog-risk task (BART) that measures three phases: decision making, reward anticipation, and feedback processing. Twenty-nine healthy young adults completed the BART. We analyzed neural activity and functional connectivity. Parametric modulation allowed assessing changes in brain functioning depending on the riskiness of the decision. Our results confirm involvement of nucleus accumbens, insula, anterior cingulate cortex, and dorsolateral prefrontal cortex in all subprocesses of risky decision-making. In addition, subprocesses were differentiated by the strength of activation in these regions, as well as by changes in activity and nucleus accumbens-connectivity by the riskiness of the decision. The presented fMRI-BART variant allows distinguishing activity and connectivity during the subprocesses of risky decision making and shows how activation and connectivity patterns relate to the riskiness of the decision. Hence, it is a useful tool for unraveling impairments in subprocesses of risky decision making in people with high risk behavior.

Resting-state voxel-wise dynamic effective connectivity predicts risky decision-making in patients with bipolar disorder type I

Patients with Bipolar Disorder type I (BD-I) exhibit maladaptive risky decision-making, which is related to impulsivity, suicide attempts, and aggressive behavior. Currently, there is a lack of effective predictive methods for early intervention in risky behaviors for patients with BD-I. This study aimed to predict risky behavior in patients with BD-I using resting-state functional magnetic resonance imaging (rs-fMRI). We included 48 patients with BD-I and 124 healthy controls (HC) and constructed voxel-wise functional connectivity (FC), dynamic FC (dFC), effective connectivity (EC), and dynamic EC (dEC) for each subject. The Balloon Analogue Risk Task (BART) was employed to measure the risky decision-making of all participants. We applied connectome-based predictive modeling (CPM) with five regression algorithms to predict risky behaviors as well as Barratt Impulsivity Scale (BIS) scores. Results showed that the BD-I had significantly lower risky adjusted pump scores compared to HC. The dEC-based linear regression-CPM model exhibited significant predictive ability for the adjusted pump scores in BD-I, while no significant predictive power was observed in HC. Furthermore, this model successfully predicted non-planning impulsiveness, motor impulsiveness, and BIS total score, but failed for attentional impulsiveness in BD-I. These findings provide a foundation for future work in predicting risky behaviors of psychiatric patients by using voxel-wise dEC underlying resting state.

Effect of age on susceptibility to the attraction effect in sequential risky decision-making

Abstract Our study aims to contribute to the existing body of research on age-related changes in decision-making by investigating susceptibility to the attraction effect across adulthood. Prior studies have produced inconsistent conclusions regarding the decision-making abilities of older individuals, with some portraying them as easily manipulated and risk-averse, while others suggest the opposite. To address this issue, we conducted two experiments using a novel paradigm of the roulette task: (1) in an online environment with 357 participants and (2) in a laboratory setting with 173 participants. The results were consistent and demonstrated the robustness of the attraction effect. However, no age differences in susceptibility to the attraction effect as a common decision bias were found. As predicted, older adults were more likely to commit simple decision-making mistakes, especially in the preliminary trials, which could have serious financial or societal consequences. Additionally, older adults exhibited more risk-seeking behaviours. Furthermore, we observed that the dynamics of decision competence (as indicated by a decrease in the selection of erroneous decoy options and an increase in decision fluency) were similar for both younger and older adults, suggesting preservation of the ability to optimise decision-making while becoming familiar with new tasks. These findings provide insight into the cognitive functioning of older adults and indicate that decision-making abilities in late adulthood may be more complex than commonly assumed.

Sleep deprivation alters utilization of negative feedback in risky decision-making.

Sleep loss has sometimes catastrophic effects on risky decision-making. However, it is unknown to what extent such deficits are exacerbated with increasing duration of sleep deprivation (SD) and whether sustained vigilant attention mediates this sleep deprivation-induced deficit. The present study aimed to investigate the effect of 36 hours of SD on 37 male college students' arousal, emotion, vigilant attention, and risky decision-making, using the Psychomotor Vigilance Test, the Game of Dice Task, and scales assessing fatigue, sleep, and emotions. Compared to baseline, SD significantly increased sleepiness, fatigue, and negative emotions, decreased positive emotions and vigilant attention, and led to a shift toward risky decision-making, and these effects often appeared 15 or 20 hours after SD. Interestingly, participants' ability to employ positive feedback was maintained, whereas their performance to utilize negative feedback was impaired even after 8 hours of sleep deprivation. Meanwhile, vigilant attention acted as a mediator between SD and risky decision-making (z = -1.97, 95% [-6.00, -0.30]). These results suggest that sleep-deprived individuals are unable to use negative feedback to optimize their judgments, which may account for their poor decision-making under risk.

Good luck or bad luck? The influence of social comparison on risk‐taking decision and the underlying neural mechanism

AbstractThe present study aimed to investigate the impact of social comparison on risk‐taking behaviors and the neural underpinnings within a competitive context. Participants who thought they were playing against a stranger in a gambling task were actually playing against a programmed computer. Eighty‐eight college students were assigned to one of three comparison conditions (downward, upward, and parallel) by varying the probability of gain. Behavioral results showed that disadvantage led to increased risk‐taking. Event‐related potential data analyses showed, in the parallel comparison condition, a significantly larger Feedback‐Related Negativity (FRN) was induced by the self's safe decision than the risky decision and by loss rather than gain. However, in the upward and downward comparison conditions, larger FRN emerged solely in response to the loss of risky rather than safe decisions. On the P3 component, participants in the upward comparison condition showed no significant difference in response to their gain or loss, while the other two conditions did. The highest P3 amplitude, delta/theta power, and aperiodic activity were found in the closely matched condition. Finally, in the downward comparison condition, a stronger delta/theta power was correlated with a less risky decision. Overall, the findings indicate that parity heightens emotional arousal and engages more cognitive resources.

A Predictive Model for Digital Currencies Prices using Geometric Brownian Motion Stochastic Differential Equation: A Case Study of the Bitcoin

In this research work, we developed a predictive model for digital currency prices, involving daily closing price as a function of time. We used the Geometric Brownian motion stochastic differential equation which was solved using inbuild functions in Microsoft Excel. While we used the Bitcoin as our case study, our model was able to predict the daily closing prices of Bitcoin to a reasonable degree of accuracy. We equally observe that the time dependent Geometric Brownian motion stochastic differential equation cannot give digital currency traders and investors a clue on when to trade off their digital assets. Thus, it become very risky using our model to make well informed trading decisions. We therefore, recommend that for minimum risk, trades and investors in digital currencies should consider a combination of other signal tools to take more informed and less risky trading decisions.

Valentine's Day and Abnormal Returns in Southeast Asia

The market becomes inefficient as a result of market anomalies such as Valentine's Day, which creates positive emotions and leads investors to act irrationally when making decisions. These irrational actions result in fluctuations in stock prices, which offer investors opportunities for returns. This study aims to investigate the impact of Valentine's Day on market index returns in Southeast Asia from 2014 to 2024. The ARCH-GARCH (1,1) model was used in this study and the results indicate that Valentine's Day has an impact on market index returns in Southeast Asia (specifically Malaysia, Thailand, and Singapore), but not in Indonesia, the Philippines, or Vietnam. These results suggest that investors who are influenced by positive emotions are more likely to feel optimistic when making risky decisions. Therefore, market anomalies like Valentine's Day can be used as a consideration for investors seeking abnormal stock returns.

Formation of leadership competences in the context of emergent development of the IT industry

The object of research is processes and approaches to the development of leadership competencies of personnel in IT organizations. The research is devoted to the analysis of the features of the formation of leadership competencies in the context of the emergent development of the IT industry. The work examines the evolution of concepts of corporate training and their adaptation to the specifics of the IT sphere, which is characterized by a high rate of technological changes and innovation. Traditional and innovative forms of personnel development are analyzed, with a special emphasis on their effectiveness in the context of the IT industry. A survey was conducted among employees of IT companies, which revealed high leadership potential and willingness to accept responsibility among industry specialists. At the same time, certain gaps in the development of certain competencies have been identified, in particular, regarding the ability to effectively delegate tasks and make risky decisions. The results of the study emphasize the need to adapt traditional leadership models to the unique requirements of the IT industry, with a focus on the development of technical competence, innovative thinking and adaptability. The paper offers recommendations for improving leadership development programs in IT companies. These recommendations include the implementation of flexible learning formats that combine online and offline components, as well as the use of modern technologies, such as virtual and augmented reality, to develop leadership skills. Special attention is paid to the development of such competencies as managing virtual teams and cross-cultural leadership, which are becoming more and more relevant in the context of the globalization of the IT industry. The paper outlines directions for further research, in particular the study of the impact of artificial intelligence and machine learning on the formation of leadership competencies in the IT sphere. The results of the study have both theoretical and practical value for the development of effective strategies for the development of leadership potential in IT companies, which will contribute to increasing their competitiveness on the global market.

EVALUATING THE RELIABILITY OF FACTORS IMPACTING PERCEIVED RISK IN MONITORING UNREGISTERED CHILDCARE CENTRES

Abstract: Nowadays, childcare plays a crucial role in society, supporting the development and well-being of children while enabling parents to work and contribute to the economy. Prioritizing childcare is essential for fostering healthy child development, supporting families, and promoting economic prosperity. However, poor-quality childcare can have detrimental consequences for children, families, and society as a whole. Hence, this study aims to evaluate the reliability of the questionnaire used in exploring an unregistered childcare monitoring model, by examining the impact of customer reviews, interactivity, law, rules and regulations, and technology innovation on perceived risk to assist parents in making less risky childcare decisions. A total of 30 working mothers from across Malaysia who send their children aged 0-4 years to childcare centres are involved in this pilot study. The study data were obtained through a questionnaire survey. The reliability level of this questionnaire is high, with a Cronbach's Alpha value exceeding 0.70. The data collected was analysed using SPSS version 29. A website or mobile app can be developed based on the findings to enable parents and the Department of Social Welfare (DSW) to rate childcare centres quality and interact with other parents. Thus, parents can make more informed decisions by purchasing childcare services with the least perceived risk. Furthermore, innovating unregistered childcare monitoring through a market-based approach can increase public confidence on DSW's capability to govern these illegal activities. The childcare monitoring model also provides a more economical solution that will reduce government spending on hiring childcare centre inspectors, as parents will voluntarily contribute their reviews about suboptimal childcare services. Keywords: Childcare; Mitoring Model; Unregistered Childcare; Perceived Risk; Customer Review; Interactivity; Law, Rules and Regulation; Technology Innovation

Strategic Expert Committees and the Markets That Assess Them: A Laboratory Experiment

Committees of experts are widely used to make decisions. We experimentally investigate the relationship between decision making in committees and the assessment of the ability of committee members by evaluators, comparing observed behavior with theoretical predictions. Treatments vary in whether members care only about a state-dependent project payoff or also about assessments and whether evaluators can base their assessments only on the decision the committee makes or also on cheap-talk statements made by committee members on their confidence in the committee decision. Evidence for the equilibrium predictions is mixed; for example, contrary to theory, committees with a concern for their assessment do not distort their decisions more than committees without, whereas in line with theory, evaluators give higher assessments to committees that take the risky decision rather than the riskless. We analyze whether evaluators rationally base their assessments on observed behavior of committees using an orthogonality test. In treatments with cheap-talk statements, assessments are quite rational; in treatments without, they are too low on average. We investigate whether committees best reply to expected project payoffs and, in treatments in which members’ payoffs also depend on assessments, to predicted assessments conditional on observed committee behavior. In all treatments, committees respond to the possibilities to raise expected payoffs but do not use them as much as predicted by theory. We conclude by showing that the amount of information about committee members’ abilities that ends up in assessments is considerably larger when evaluators observe committees’ decisions and statements rather than only decisions. This paper was accepted by Yan Chen, behavioral economics and decision analysis. Funding: We gratefully acknowledge financial support from the Dutch Research Council (NWO) under the grant 400-09-338; and Erasmus University Rotterdam [Grant CSTO 2014–54]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2021.03007 .

Risky decision-making and nonsuicidal self-injury among university students: Examining the role of criticism feedback.

Risky decision-making putatively contributes to nonsuicidal self-injury (NSSI) yet empirical support for this association is inconsistent. Studies have not simulated socioemotional contexts most closely linked to NSSI, which may partially explain mixed findings. Accordingly, we examined the association between NSSI and risky decision-making following the receipt of criticism from a close other, a key interpersonal context. The study included 286 university students (Mage = 21.11) oversampled for a lifetime history of NSSI. Participants completed a modified Iowa Gambling Task, in which they chose to play or pass on "good" and "bad" decks associated with monetary gains and losses. Participants also completed the Criticism Gambling Task, which was identical to the Iowa Gambling Task except critical audio comments preceded each block of trials. Based on results of multilevel growth curve analyses, decreases in risky decision-making were steeper on the Iowa Gambling Task compared to the Criticism Gambling Task, suggesting poorer learning in the context of criticism. Further, how past-month NSSI was related to changes in risky decision-making across blocks differed between the two tasks, b = -0.004, t(3140.00) = 2.48, p = .013. On the Iowa Gambling Task, all participants decreased their risky decision-making, whereas on the Criticism Gambling Task, higher past-month NSSI frequencies were associated with riskier decision-making. Our findings support associations between risky decision-making and NSSI in negative socioemotional contexts, consistent with functional models of NSSI.