Konstantinidis, E, Taylor, RT and Newell, BR (2017) Magnitude and incentives: Revisiting the overweighting of extreme events in risky decisions from experience. Psychonomic Bulletin and Review. ISSN 1069-9384
Abstract
Recent experimental evidence in experience-based decision-making suggests that people are more risk seeking in the gains domain relative to the losses domain. This critical result is at odds with the standard reflection effect observed in description-based choice and explained by Prospect Theory. The so-called reversed-reflection effect has been predicated on the extreme-outcome rule, which suggests that memory biases affect risky choice from experience. To test the general plausibility of the rule, we conducted two experiments examining how the magnitude of prospective outcomes impacts risk preferences. We found that while the reversed-reflection effect was present with small-magnitude payoffs, using payoffs of larger magnitude brought participants’ behavior back in line with the standard reflection effect. Our results suggest that risk preferences in experience-based decision-making are not only affected by the relative extremeness but also by the absolute extremeness of past events.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © The Author(s) 2017. Open Access. This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made. |
Keywords: | Decisions from experience; Magnitude; Risky choice; Extreme-outcome rule; Decision-making |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Management Division (LUBS) (Leeds) > Management Division Decision Research (LUBS) |
Depositing User: | Symplectic Publications |
Date Deposited: | 22 Sep 2017 08:47 |
Last Modified: | 23 Jun 2023 22:36 |
Status: | Published |
Publisher: | Springer Verlag |
Identification Number: | 10.3758/s13423-017-1383-8 |
Related URLs: | |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:121562 |