Riskless Choice Research Articles

How couples who have undergone in vitro fertilization decide what to do with surplus frozen embryos

In a qualitative interview study of 77 families with stored frozen embryos, we found that while embryo disposition decision making was influenced by individual life circumstances, embryo quantity/quality, personal values, embryo conceptualization, and clinic information, it was a stepwise process that could be represented as three sequential questions: (1) Will the embryos be used for additional attempts at conception? If not, (2) Will the embryos remain in storage? And if not, (3) Will the embryos be donated to other people or to science, or will they be destroyed? While almost two-thirds (63%) of participants kept their embryos in storage after 5 years, either passively through disagreement or indecision or actively to maintain embryo potential, avert feelings of loss, or as psychological or genetic "insurance," IVF clinic support and detailed information about options motivated families to make disposition decisions.

Neural Antecedents of the Endowment Effect

The "endowment effect" refers to the tendency to place greater value on items that one owns-an anomaly that violates the reference-independence assumption of rational choice theories. We investigated neural antecedents of the endowment effect in an event-related functional magnetic resonance imaging (fMRI) study. During scanning, 24 subjects considered six products paired with 18 different prices under buying, choosing, or selling conditions. Subjects showed greater nucleus accumbens (NAcc) activation for preferred products across buy and sell conditions combined, but greater mesial prefrontal cortex (MPFC) activation in response to low prices when buying versus selling. During selling, right insular activation for preferred products predicted individual differences in susceptibility to the endowment effect. These findings are consistent with a reference-dependent account in which ownership increases value by enhancing the salience of the possible loss of preferred products.

Age-related differences in adaptive decision making: Sensitivity to expected value in risky choice

AbstractWhile previous research has found that children make more risky decisions than their parents, little is known about the developmental trajectory for the ability to make advantageous decisions. In a sample of children, 5-11 years old, we administered a new risky decision making task in which the relative expected value (EV) of the risky and riskless choice options was varied over trials. Younger children (age 5-7) showed significantly less responsiveness to EV differences than their parents on both trials involving risky gains and trials involving risky losses. For older children (age 8-11) this deficit was smaller overall but was greater on loss trials than on gain trials. Children of both ages made more risky choices than adults when risky choices were disadvantageous. We further analyzed these results in terms of children's ability to utilize probability and outcome information, and discussed them in terms of developing brain structures vital for decision making under uncertainty.

A model of riskless choice

Current researches on how we arrive at decisions concentrate on utility functions. This article deals with individuals' choices among pairs of dternatives involving only two components, in situations where no risks are incurred. For instance, Alice's father announces he will buy her a Ford coupé for graduation. Sheispermitted toselect between blue and yellow, and to decide whether or not it is to be convertible. A model for choices of this type is detailed here and a test of it reported.

Individual-Level Loss Aversion in Riskless and Risky Choices

Loss aversion can occur in riskless and risky choices. Yet, there is no evidence whether people who are loss averse in riskless choices are also loss averse in risky choices. We measure individual-level loss aversion in riskless choices in an endowment effect experiment by eliciting both WTA and WTP from each of our 360 subjects (randomly selected customers of a car manufacturer). All subjects also participate in a simple lottery choice task which arguably measures loss aversion in risky choices. We find substantial heterogeneity in both measures of loss aversion. Loss aversion in the riskless choice task and loss aversion in the risky choice task are highly significantly and strongly positively correlated. We find that in both choice tasks loss aversion increases in age, income, and wealth, and decreases in education.

Keeping Up with the Joneses, Reference Dependence, and Equilibrium Indeterminacy

This model extends the keeping up with the Joneses (KUJ) model to incorporate the notion that positional concerns in consumption are best modelled with a reference dependence specification of preferences, as postulated by Tversky and Kahneman (1991) in the context of riskless choice. In line with this specification, which has received substantial empirical support in the literature, we assume that the marginal returns on the own consumption are increasing below the aggregate per capita levels of consumption (which is the reference point in our model). The main conclusion of the paper is that in our KUJ model aggregate consumption may be subject to sunspot fluctuations and the equilibrium level of consumption is not uniquely pinned down. The paper also discusses the role that fiscal policy can play in order to undo the effect of consumption externalities on both the determinacy and the desirability of the equilibrium. JEL Classification: D11, H21

Reasoning About Outcome Probabilities and Values in Preference Reversals

Research on preference reversals has demonstrated a disproportionate influence of outcome probability on choices between monetary gambles. The aim was to investigate the hypothesis that this is a prominence effect originally demonstrated for riskless choice. Another aim was to test the structure compatibility hypothesis as an explanation of the effect. The hypothesis implies that probability should be the prominent attribute when compared with value attributes both in a choice and a preference rating procedure. In Experiment 1, two groups of undergraduates were presented with medical treatments described by two value attributes (effectiveness and pain-relief). All participants performed both a matching task and made preference ratings. In the latter task, outcome probabilities were added to the descriptions of the medical treatments for one of the groups. In line with the hypothesis, this reduced the prominence effect on the preference ratings observed for effectiveness. In Experiment 2, a matching task was used to demonstrate that probability was considered more important by a group of participating undergraduates than the value attributes. Furthermore, in both choices and preference ratings the expected prominence effect was found for probability.

Gain/Loss Asymmetry and Riskless Choice: Loss Aversion in Choices among Job Finalists

Tversky and Kahneman (1991) extended the notions of reference points and gain/loss asymmetry to multiattribute choice tasks having alternatives that cannot be assigned explicit probabilities. Two experiments were designed to test these propositions in the context of choices among job finalists. In the first experiment, undergraduates (N= 82) were provided with attribute information on two job candidates, along with (incomplete) attribute information on a previous job incumbent. The results showed that the relative standing of the job finalists was evaluated from the reference point of the incumbent's performance on the non-missing attributes. Candidates representing the status quo (i.e., no change in performance on the non-missing attributes) were preferred over candidates representing a loss. However, candidates representing a gain were not preferred over candidates representing the status quo. In the second experiment, undergraduates (N= 74) received assessor training and then watched a demonstration of performance in one of two work samples. Participants told that the demonstration was one of excellent performance strongly preferred the status quo candidate (i.e., the one that performed equally well on the demonstration work sample). However, participants told that the example was one of poor performance were indifferent between the status quo and gain candidate. We conclude that the gain/loss asymmetry commonly found in risky choice can also be found in riskless choice tasks such as choosing among job finalists.

When Four Distinct Ways to Measure Utility Are the Same

Assuming that binary rank- and sign-dependent utility holds for gambles and that riskless choice utility can be constructed using the binary operation of joint receipt of consequences, there are four distinct measures of utility over gains: the two, one from gambles and the other from joint receipt, that arise by working with the trade-offs of just gains and the two that arise by working with the trade-offs of gains with losses. The problem is to discover testable behavioral properties that make the various pairs of measures identical. This is worked out completely, leading to six distinct properties. Three have previously been studied both theoretically and empirically: event commutativity, segregation, and duplex decomposition. Three are new and have not been studied empirically: joint receipt decomposition (for gains and for the mixed case) and joint receipt consistency. Similar issues and results hold for the utility of losses, where the mathematics is identical except for parameter values. The paper concludes with a discussion of how the results extend to general finite gambles and of some possible difficulties.

Consumer Multiattribute Judgments under Attribute-Weight Uncertainty

This article examines how multiattribute impressions are formed in riskless choice and judgment when there is uncertainty or ambiguity associated with attribute-importance weights. Building on previous results in the modeling of ambiguity in probabilities, a mathematical theory of multiattribute judgments under weight uncertainty is developed. The theory incorporates framing effects for ambiguous weights in multiattribute judgments, similar to the gain-loss framing effects found in studies of preferences for lotteries. Specifically, it is shown that the importance of an attribute depends on whether it is seen as enhancing or preserving an expected level of utility in a category. The results of three experiments provide support for the predicted dependency of the effects of weight uncertainty on an attribute's framing. The data also suggest that, within frames, the effects of increasing uncertainty may not be additive across attributes. In particular, given pairs of uncertain attributes with different frames, subjects acted as if they were applying a single frame to both attributes, resulting in a common direction for the weight-uncertainty effect.

Multidimensional utility models for risky and riskless choice

Subjects evaluated 27 hypothetical job offers using both riskless rating scale and risky utility response modes. These preference judgments were then analyzed using both statistical and conjoint measurement procedures. Additive statistical models provided excellent approximations to both the riskless and risky responses of every subject. Nonetheless, half of the subjects showed statistically significant, and in some cases, substantial departures from additivity. Despite the predictive success of the additive and multiplicative models studied, the conjoint measurement analysis revealed that several subjects substantially violated the ordinal properties shared by both additive and multiplicative models. In addition, all subjects showed some minor violations of the conjoint measurement axioms. A simple numerical analysis showed, however, that most of these minor violations may have been due to random error.