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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.

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Results from Experiment 1.(A). Reflection scores as a function of experimental condition.                            Participants displayed reliably higher reflection scores for described                            vs. experienced problems (p<.001). (B). Reflection                            scores on experienced trials as a function of block in the experiment.                            There was a trend toward a greater reverse reflection effect as the                            potential outcomes were learned. (C). Gambling quotient as a function of                            experimental condition and choice type. For gains, participants were                            risk seeking for experienced problems, but risk averse for described                            problems. In contrast, for losses, participants were risk averse in                            experienced problems, but risk seeking in described problems. *                             =  p<.05. (D). Percentage                            correct on catch trials as a function of experience training block.                            Performance increased across blocks, but was high throughout, peaking at                            97.6% on the final training block.
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pone-0020262-g002: Results from Experiment 1.(A). Reflection scores as a function of experimental condition. Participants displayed reliably higher reflection scores for described vs. experienced problems (p<.001). (B). Reflection scores on experienced trials as a function of block in the experiment. There was a trend toward a greater reverse reflection effect as the potential outcomes were learned. (C). Gambling quotient as a function of experimental condition and choice type. For gains, participants were risk seeking for experienced problems, but risk averse for described problems. In contrast, for losses, participants were risk averse in experienced problems, but risk seeking in described problems. *  =  p<.05. (D). Percentage correct on catch trials as a function of experience training block. Performance increased across blocks, but was high throughout, peaking at 97.6% on the final training block.

Mentions: Contrary to the prediction of prospect theory, we found a reversal of the reflection effect for the experienced problems, even with equiprobable outcomes in Experiment 1. Figure 2A shows how people gambled more for gains than losses when the outcomes were learned from experience, but not when they were described. The reflection scores, calculated as the probability of gambling on loss trials minus the probability of gambling on gain trials, were significantly higher on described trials than on experienced trials (t(55)  = 4.45, p<.001, d = .60). The reflection scores for experience-based decisions trended downward across trials (see Fig. 2B), indicating that this reversal became more established as the relationships between cues and rewards were learned more accurately, although the visible downward trend was not statistically reliable (F(2,106)  = 1.98, p = .14, η2p = .04). Figure 2C shows that this difference between the experienced and described trials represents a full reversal of the reflection effect (condition × choice type interaction, F(1,55)  = 19.9, p<.001, η2p = .27). On gain trials, participants flipped from risk aversion on described problems to risk seeking on experienced problems. On loss trials, participants flipped from risk seeking on described problems to risk aversion on experienced problems (p<.031 for all pairwise comparisons).


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)

Results from Experiment 1.(A). Reflection scores as a function of experimental condition.                            Participants displayed reliably higher reflection scores for described                            vs. experienced problems (p<.001). (B). Reflection                            scores on experienced trials as a function of block in the experiment.                            There was a trend toward a greater reverse reflection effect as the                            potential outcomes were learned. (C). Gambling quotient as a function of                            experimental condition and choice type. For gains, participants were                            risk seeking for experienced problems, but risk averse for described                            problems. In contrast, for losses, participants were risk averse in                            experienced problems, but risk seeking in described problems. *                             =  p<.05. (D). Percentage                            correct on catch trials as a function of experience training block.                            Performance increased across blocks, but was high throughout, peaking at                            97.6% on the final training block.
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Related In: Results  -  Collection

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getmorefigures.php?uid=PMC3105996&req=5

pone-0020262-g002: Results from Experiment 1.(A). Reflection scores as a function of experimental condition. Participants displayed reliably higher reflection scores for described vs. experienced problems (p<.001). (B). Reflection scores on experienced trials as a function of block in the experiment. There was a trend toward a greater reverse reflection effect as the potential outcomes were learned. (C). Gambling quotient as a function of experimental condition and choice type. For gains, participants were risk seeking for experienced problems, but risk averse for described problems. In contrast, for losses, participants were risk averse in experienced problems, but risk seeking in described problems. *  =  p<.05. (D). Percentage correct on catch trials as a function of experience training block. Performance increased across blocks, but was high throughout, peaking at 97.6% on the final training block.
Mentions: Contrary to the prediction of prospect theory, we found a reversal of the reflection effect for the experienced problems, even with equiprobable outcomes in Experiment 1. Figure 2A shows how people gambled more for gains than losses when the outcomes were learned from experience, but not when they were described. The reflection scores, calculated as the probability of gambling on loss trials minus the probability of gambling on gain trials, were significantly higher on described trials than on experienced trials (t(55)  = 4.45, p<.001, d = .60). The reflection scores for experience-based decisions trended downward across trials (see Fig. 2B), indicating that this reversal became more established as the relationships between cues and rewards were learned more accurately, although the visible downward trend was not statistically reliable (F(2,106)  = 1.98, p = .14, η2p = .04). Figure 2C shows that this difference between the experienced and described trials represents a full reversal of the reflection effect (condition × choice type interaction, F(1,55)  = 19.9, p<.001, η2p = .27). On gain trials, participants flipped from risk aversion on described problems to risk seeking on experienced problems. On loss trials, participants flipped from risk seeking on described problems to risk aversion on experienced problems (p<.031 for all pairwise comparisons).

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