Limits...
Of black swans and tossed coins: is the description-experience gap in risky choice limited to rare events?

Ludvig EA, Spetch ML - PLoS ONE (2011)

Bottom Line: Specifically, rare outcomes are overweighted when described and underweighted when experienced.For experience-based decisions, there was a reversal of the reflection effect with greater risk seeking for gains than for losses, as compared to description-based decisions.This fundamental difference in experienced and described choices cannot be explained by the weighting of rare events and suggests a separate subjective utility curve for experience.

View Article: PubMed Central - PubMed

Affiliation: Princeton Neuroscience Institute, Princeton University, Princeton, New Jersey, United States of America. eludvig@princeton.edu

ABSTRACT
When faced with risky decisions, people tend to be risk averse for gains and risk seeking for losses (the reflection effect). Studies examining this risk-sensitive decision making, however, typically ask people directly what they would do in hypothetical choice scenarios. A recent flurry of studies has shown that when these risky decisions include rare outcomes, people make different choices for explicitly described probabilities than for experienced probabilistic outcomes. Specifically, rare outcomes are overweighted when described and underweighted when experienced. In two experiments, we examined risk-sensitive decision making when the risky option had two equally probable (50%) outcomes. For experience-based decisions, there was a reversal of the reflection effect with greater risk seeking for gains than for losses, as compared to description-based decisions. This fundamental difference in experienced and described choices cannot be explained by the weighting of rare events and suggests a separate subjective utility curve for experience.

Show MeSH

Related in: MedlinePlus

Schematic of the method used in the experiments.(A) On experience-based choice trials, participants were                        faced with a choice between two of four possible colored doors. Two doors                        always led to losses, and the other two always led to gains. Their choice                        was immediately followed by a gain or loss of a fixed or variable number of                        points throughout Experiment 1 and during the pre-training trials only in                        Experiment 2. (B) On description-based choice trials,                        participants were presented with verbal and pictorial descriptions of                        different choices between fixed or variable number of points. No feedback                        was given until all trials in a run were complete to prevent participants                        from learning from their experience.
© Copyright Policy
Related In: Results  -  Collection


getmorefigures.php?uid=PMC3105996&req=5

pone-0020262-g001: Schematic of the method used in the experiments.(A) On experience-based choice trials, participants were faced with a choice between two of four possible colored doors. Two doors always led to losses, and the other two always led to gains. Their choice was immediately followed by a gain or loss of a fixed or variable number of points throughout Experiment 1 and during the pre-training trials only in Experiment 2. (B) On description-based choice trials, participants were presented with verbal and pictorial descriptions of different choices between fixed or variable number of points. No feedback was given until all trials in a run were complete to prevent participants from learning from their experience.

Mentions: In this pair of experiments, we demonstrate that the differences between described and experienced risky choices are not limited to rare events. We developed a novel task for decisions from experience and description, wherein the same participants were repeatedly tested for risky choice in both ways (Fig. 1). In the experience conditions, participants chose between two colored doors and then immediately gained or lost points. One door led to a guaranteed win of 20 points, whereas a second door was followed by a 50/50 chance of winning 0 or 40 points. The final two doors used the same contingencies, but were followed by losses instead of gains. In the description conditions, the same participants chose between losing (or winning) a guaranteed number of points and a gamble where they could lose (or win) twice as many points. No immediate feedback was given on the outcome of this described gamble. Based on traditional prospect theory, we would expect risk aversion for gains and risk seeking for losses in both conditions. If, however, decision making from experience does not conform to prospect theory, even in the absence of rare events, then we would expect a difference between the experience and description conditions.


Of black swans and tossed coins: is the description-experience gap in risky choice limited to rare events?

Ludvig EA, Spetch ML - PLoS ONE (2011)

Schematic of the method used in the experiments.(A) On experience-based choice trials, participants were                        faced with a choice between two of four possible colored doors. Two doors                        always led to losses, and the other two always led to gains. Their choice                        was immediately followed by a gain or loss of a fixed or variable number of                        points throughout Experiment 1 and during the pre-training trials only in                        Experiment 2. (B) On description-based choice trials,                        participants were presented with verbal and pictorial descriptions of                        different choices between fixed or variable number of points. No feedback                        was given until all trials in a run were complete to prevent participants                        from learning from their experience.
© Copyright Policy
Related In: Results  -  Collection

Show All Figures
getmorefigures.php?uid=PMC3105996&req=5

pone-0020262-g001: Schematic of the method used in the experiments.(A) On experience-based choice trials, participants were faced with a choice between two of four possible colored doors. Two doors always led to losses, and the other two always led to gains. Their choice was immediately followed by a gain or loss of a fixed or variable number of points throughout Experiment 1 and during the pre-training trials only in Experiment 2. (B) On description-based choice trials, participants were presented with verbal and pictorial descriptions of different choices between fixed or variable number of points. No feedback was given until all trials in a run were complete to prevent participants from learning from their experience.
Mentions: In this pair of experiments, we demonstrate that the differences between described and experienced risky choices are not limited to rare events. We developed a novel task for decisions from experience and description, wherein the same participants were repeatedly tested for risky choice in both ways (Fig. 1). In the experience conditions, participants chose between two colored doors and then immediately gained or lost points. One door led to a guaranteed win of 20 points, whereas a second door was followed by a 50/50 chance of winning 0 or 40 points. The final two doors used the same contingencies, but were followed by losses instead of gains. In the description conditions, the same participants chose between losing (or winning) a guaranteed number of points and a gamble where they could lose (or win) twice as many points. No immediate feedback was given on the outcome of this described gamble. Based on traditional prospect theory, we would expect risk aversion for gains and risk seeking for losses in both conditions. If, however, decision making from experience does not conform to prospect theory, even in the absence of rare events, then we would expect a difference between the experience and description conditions.

Bottom Line: Specifically, rare outcomes are overweighted when described and underweighted when experienced.For experience-based decisions, there was a reversal of the reflection effect with greater risk seeking for gains than for losses, as compared to description-based decisions.This fundamental difference in experienced and described choices cannot be explained by the weighting of rare events and suggests a separate subjective utility curve for experience.

View Article: PubMed Central - PubMed

Affiliation: Princeton Neuroscience Institute, Princeton University, Princeton, New Jersey, United States of America. eludvig@princeton.edu

ABSTRACT
When faced with risky decisions, people tend to be risk averse for gains and risk seeking for losses (the reflection effect). Studies examining this risk-sensitive decision making, however, typically ask people directly what they would do in hypothetical choice scenarios. A recent flurry of studies has shown that when these risky decisions include rare outcomes, people make different choices for explicitly described probabilities than for experienced probabilistic outcomes. Specifically, rare outcomes are overweighted when described and underweighted when experienced. In two experiments, we examined risk-sensitive decision making when the risky option had two equally probable (50%) outcomes. For experience-based decisions, there was a reversal of the reflection effect with greater risk seeking for gains than for losses, as compared to description-based decisions. This fundamental difference in experienced and described choices cannot be explained by the weighting of rare events and suggests a separate subjective utility curve for experience.

Show MeSH
Related in: MedlinePlus