An easy decision
Betting Your Favorite to Win: Costly Reluctance to Hedge Desired Outcomes
Carey Morewedge, Simone Tang & Richard Larrick
Management Science, forthcoming
Abstract:
We examined whether people reduce the impact of negative outcomes through emotional hedging — betting against the occurrence of desired outcomes. We found substantial reluctance to bet against the success of preferred U.S. presidential candidates and Major League Baseball, National Football League, National Collegiate Athletic Association (NCAA) basketball, and NCAA hockey teams. This reluctance was not attributable to optimism or a general aversion to hedging. Reluctance to hedge desired outcomes stemmed from identity signaling, a desire to preserve an important aspect of the bettor’s identity. Reluctance to hedge occurred when the diagnostic cost of the negative self-signal that hedging would produce outweighed the pecuniary rewards associated with hedging. Participants readily accepted hedges and pure gambles with no diagnostic costs. They also more readily accepted hedges with diagnostic costs when the pecuniary rewards associated with those hedges were greater. Reluctance to hedge identity-relevant outcomes produced two anomalies in decision making, risk seeking and dominance violations. More than 45% of NCAA fans in Studies 5 and 6, for instance, turned down a “free” real $5 bet against their team. The results elucidate anomalous decisions in which people exhibit disloyalty aversion, forgoing personal rewards that would conflict with their loyalties and commitments to others, beliefs, and ideals.
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From Power to Inaction: Ambivalence Gives Pause to the Powerful
Geoffrey Durso, Pablo Briñol & Richard Petty
Psychological Science, forthcoming
Abstract:
Research has shown that people who feel powerful are more likely to act than those who feel powerless, whereas people who feel ambivalent are less likely to act than those whose reactions are univalent (entirely positive or entirely negative). But what happens when powerful people also are ambivalent? On the basis of the self-validation theory of judgment, we hypothesized that power and ambivalence would interact to predict individuals’ action. Because power can validate individuals’ reactions, we reasoned that feeling powerful strengthens whatever reactions people have during a decision. It can strengthen univalent reactions and increase action orientation, as shown in past research. Among people who hold an ambivalent judgment, however, those who feel powerful would be less action oriented than those who feel powerless. Two experiments provide evidence for this hypothesized interactive effect of power and ambivalence on individuals’ action tendencies during both positive decisions (promoting an employee; Experiment 1) and negative decisions (firing an employee; Experiment 2). In summary, when individuals’ reactions are ambivalent, power increases the likelihood of inaction.
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Risk (Mis)Perception: When Greater Risk Reduces Risk Valuation
Uzma Khan & Daniella Kupor
Journal of Consumer Research, forthcoming
Abstract:
The authors show that the value of a risky option decreases upon addition of risky prospects of the same valence. For instance, a medical drug with a potential side effect of seizures is viewed as less threatening when it also has smaller potential side effects, such as congestion and fatigue; travel insurance covering serious injury is viewed as less attractive when it also covers minor ailments; a lottery offering a chance to win an iPad is viewed as less attractive when it also offers a chance to win smaller prizes. As a result, consumers can perceive normatively more dangerous (beneficial) options to be less dangerous (beneficial) and normatively less dangerous (beneficial) options to be more dangerous (beneficial). This effect arises because people believe that larger prospects (e.g., seizures) are less likely than smaller prospects (e.g., congestion). Therefore, inclusion of smaller prospects by contrast makes a larger prospect appear less likely, which in turn reduces the perceived value of the risky option. Thus this effect arises only when smaller prospects are added to a larger prospect, and only when the prospects are probabilistic. Cognitive load and feelings of personal control also moderate the effect.
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Are We All Overconfident in the Long Run? Evidence from One Million Marathon Participants
Michał Krawczyk & Maciej Wilamowski
Journal of Behavioral Decision Making, forthcoming
Abstract:
In this project, we measured overconfidence in a large, heterogeneous sample making familiar, repeated choices in a natural environment that provided direct feedback. Specifically, in study 1, we elicited predictions of own finishing time among participants of the 2012 Warsaw Marathon. The participants' prediction errors were highly correlated with the change in pace over the course of the run: overly optimistic forecasters slowed down more in the second half. In study 2, we consequently took this slowdown as a proxy for overconfidence and used existing field data of one million participants in several large marathons for which split times are available (but own predictions are not). Both studies indicate that men as well as the youngest and oldest participants tend to be more confident. In study 2, we were able to investigate national and cultural dimensions. We found confirmation of previously reported findings of relative overconfidence in Asians. Additionally, we show some largely novel results, in particular that relatively conservative societies tend to be relatively overconfident.
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Johannes Doerflinger, Torsten Martiny-Huenger & Peter Gollwitzer
Journal of Experimental Social Psychology, forthcoming
Abstract:
Planning our actions in advance is an important means of action control and increases the likelihood of initiating intended actions at critical points in time (Gollwitzer, 1999; Gollwitzer & Oettingen, 2016). In the current research, we investigate whether planning to deliberate thoroughly can also increase the likelihood of deliberation when it is needed. As an increase in deliberation is often associated with more thorough use of available information, we predict that planning to deliberate causes people to adjust their current course of action more closely to newly available information. We test this prediction in three experiments in which the participants are faced with the decision to continue with or disengage from a chosen course of action after new information has become available. The first experiment uses an established escalation of commitment paradigm (Study 1); the second and third experiment use a more naturalistic task based on the card game of poker (Studies 2 & 3). In all three studies, planning to deliberate at a critical point in time by forming implementation intentions reduced the tendency to stick to a failing course of action, suggesting that plans to deliberate can be used to increase the likelihood of deliberation and thereby the effective processing of newly available information.
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The Sin of Prediction: When Mentally Simulated Alternatives Compete With Reality
John Petrocelli, Asher Rubin & Ryan Stevens
Personality and Social Psychology Bulletin, forthcoming
Abstract:
Experiential and associative learning are essential to optimal decision making. However, research shows that, even when exposed to repeated trials, people often fail to learn probabilities and cause/effect covariations. Consistent with the counterfactual inflation hypothesis, it is proposed that counterfactuals can interfere with memory of repeated exposures and therefore inhibit learning. Five experimental studies tested counterfactual thinking as a potential mechanism underlying this learning deficit using a simple, biased coin flipping paradigm. Participants were instructed to either simply observe or to predict and observe outcomes of a biased coin being flipped in multiple trials (Experiments 1-4). In all four experiments, counterfactual thought frequency mediated the relationship between task instructions and the extent of bias detection (i.e., learning). Experiment 5 showed that mental simulations of alternative outcomes were especially deleterious to learning and decision making. Findings are discussed in light of experiential learning theory and applied implications.
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Fantasy and Dread: The Demand for Information and the Consumption Utility of the Future
Ananda Ganguly & Joshua Tasoff
Management Science, forthcoming
Abstract:
We present evidence that intrinsic demand for information about the future is increasing in expected future consumption utility. In the first experiment, subjects may resolve a lottery now or later. The information is useless for decision making, but the larger the reward, the more likely subjects are to pay to resolve the lottery early. In the second experiment, subjects may pay to avoid being tested for herpes simplex virus type 1 (HSV-1) and the more highly feared type 2 (HSV-2). Subjects are three times more likely to avoid testing for HSV-2, suggesting that more aversive outcomes lead to more information avoidance. In a third experiment, subjects make choices about when to get tested for a fictional disease. Some subjects behave in a way consistent with expected utility theory, and others exhibit greater delay of information for more severe diseases. We also find that information choice is correlated with positive affect, ambiguity aversion, and time preference, as some theories predict.
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Bargaining zone distortion in negotiations: The elusive power of multiple alternatives
Michael Schaerer, David Loschelder & Roderick Swaab
Organizational Behavior and Human Decision Processes, November 2016, Pages 156–171
Abstract:
We challenge the assumption that having multiple alternatives is always better than a single alternative by showing that negotiators who have additional alternatives ironically exhibit downward-biased perceptions of their own and their opponent’s reservation price, make lower demands, and achieve worse outcomes in distributive negotiations. Five studies demonstrate that the apparent benefits of multiple alternatives are elusive because multiple alternatives led to less ambitious first offers (Studies 1–2) and less profitable agreements (Study 3). This distributive disadvantage emerged because negotiators’ perception of the bargaining zone was more distorted when they had additional (less attractive) alternatives than when they only had a single alternative (Studies 1–3). We further found that this multiple-alternatives disadvantage only emerges when negotiators used quantitative (versus qualitative) evaluation standards to gauge the extremity of their offers (Study 4), and when they base their offers on their own numerical alternative(s) versus on opponent information (Study 5).
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The Too-Much-Precision Effect: When and Why Precise Anchors Backfire With Experts
David Loschelder et al.
Psychological Science, forthcoming
Abstract:
Past research has suggested a fundamental principle of price precision: The more precise an opening price, the more it anchors counteroffers. The present research challenges this principle by demonstrating a too-much-precision effect. Five experiments (involving 1,320 experts and amateurs in real-estate, jewelry, car, and human-resources negotiations) showed that increasing the precision of an opening offer had positive linear effects for amateurs but inverted-U-shaped effects for experts. Anchor precision backfired because experts saw too much precision as reflecting a lack of competence. This negative effect held unless first movers gave rationales that boosted experts’ perception of their competence. Statistical mediation and experimental moderation established the critical role of competence attributions. This research disentangles competing theoretical accounts (attribution of competence vs. scale granularity) and qualifies two putative truisms: that anchors affect experts and amateurs equally, and that more precise prices are linearly more potent anchors. The results refine current theoretical understanding of anchoring and have significant implications for everyday life.
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The Value of Nothing: Asymmetric Attention to Opportunity Costs Drives Intertemporal Decision Making
Daniel Read, Christopher Olivola & David Hardisty
Management Science, forthcoming
Abstract:
This paper proposes a novel account of impatience: People pay more attention to the opportunity costs of choosing larger, later rewards than to the opportunity costs of choosing smaller, sooner ones. Eight studies show that when the opportunity costs of choosing smaller, sooner rewards are subtly highlighted, people become more patient, whereas when the opportunity costs of choosing larger, later rewards are highlighted this has no effect. This pattern is robust to variations in the choice task, to the participant population, and to whether the choices are incentivized or hypothetical. We argue that people are naturally aware of the opportunity costs of delayed rewards but pay less attention to those associated with smaller, sooner ones. We conclude by discussing implications for theory and policy.
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The mere presence of an outgroup member disrupts the brain’s feedback-monitoring system
Nicholas Hobson & Michael Inzlicht
Social Cognitive and Affective Neuroscience, November 2016, Pages 1698-1706
Abstract:
Much of human learning happens in the social world. A person’s social identity — the groups to which they belong, the people with whom they identify — is a powerful cue that can affect our goal-directed behaviors, often implicitly. In the present experiment, we explored the underlying neural mechanisms driving these processes, testing hypotheses derived from social identity theory. In a within-subjects design, participants underwent a minimal group manipulation where they were randomly assigned to an arbitrary ingroup. In two blocks of the experiment, participants were asked to complete a task for money while being observed by an ingroup member and outgroup member separately. Results revealed that being observed by an ingroup or outgroup member led to divergent patterns of neural activity associated with feedback monitoring, namely the feedback-related negativity (FRN). Receiving feedback in the presence of an ingroup member produced a typical FRN signal, but the FRN was dampened while receiving feedback in the presence of an outgroup member. Further, this differentiated neural pattern was exaggerated in people who reported greater intergroup bias. Together, the mere presence of a person can alter how the brain adaptively monitors feedback, impairing the reinforcement learning signal when the person observing is an outgroup member.
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Gratitude Facilitates Private Conformity: A Test of the Social Alignment Hypothesis
Jomel Ng et al.
Emotion, forthcoming
Abstract:
Past research has established clear support for the prosocial function of gratitude in improving the well-being of others. The present research provides evidence for another hypothesized function of gratitude: the social alignment function, which enhances the tendency of grateful individuals to follow social norms. We tested the social alignment hypothesis of gratitude in 2 studies with large samples. Using 2 different conformity paradigms, participants were subjected to a color judgment task (Experiment 1) and a material consumption task (Experiment 2). They were provided with information showing choices allegedly made by others, but were allowed to state their responses in private. Supporting the social alignment hypothesis, the results showed that induced gratitude increased private conformity. Specifically, participants induced to feel gratitude were more likely to conform to the purportedly popular choice, even if the option was factually incorrect (Experiment 1). This effect appears to be specific to gratitude; induction of joy produced significantly less conformity than gratitude (Experiment 2). We discuss whether the social alignment function provides a behavioral pathway in the role of gratitude in building social relationships.
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Known Unknowns: A Critical Determinant of Confidence and Calibration
Daniel Walters et al.
Management Science, forthcoming
Abstract:
We propose that an important determinant of judged confidence is the evaluation of evidence that is unknown or missing, and overconfidence is often driven by the neglect of unknowns. We contrast this account with prior research suggesting that overconfidence is due to biased processing of known evidence in favor of a focal hypothesis. In Study 1, we asked participants to list their thoughts as they answered two-alternative-forced choice trivia questions and judge the probability that their answers were correct. Participants who thought more about unknowns were less overconfident. In Studies 2 and 3 we asked participants to list unknowns before assessing their confidence. “Considering the unknowns” reduced overconfidence substantially, and was more effective than the classic “consider the alternative” debiasing technique. Moreover, considering the unknowns selectively reduced confidence in domains where participants were overconfident, but did not affect confidence in domains where participants were well-calibrated or underconfident.
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Confidently Biased: Comparisons with Anchors Bias Estimates and Increase Confidence
Andrew Smith & Lindsay Marshall
Journal of Behavioral Decision Making, forthcoming
Abstract:
Across a wide variety of situations, exposure to anchors has been shown to bias people's estimates. What is not known, however, is whether externally provided anchors influence the confidence that people have in their estimates. Our studies had two goals. First, we tested whether exposure to anchors influenced people's subjective confidence levels (Studies 1 and 2). These studies revealed that people who made estimates after making comparisons with externally provided anchors tended to be more confident in their estimates than people who did not see anchors. The second goal was to test two explanations as to why anchors increase people's confidence. In Study 3, we tested the explanation that anchors increase confidence because participants thought the anchors provided useful information. In Study 4, we tested the explanation that exposure to anchors causes people to consider a narrower range of plausible values as compared to when not exposed to anchors. Support was found only for the explanation that comparisons with anchors increase confidence because people who are exposed to anchors consider a narrower range of plausible values. Taken together, these studies reveal the powerful influence anchors can have — they not only bias estimates, but also increase people's confidence in their biased estimates.
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Sean James Fallon et al.
Journal of Cognitive Neuroscience, forthcoming
Abstract:
A balance has to be struck between supporting distractor-resistant representations in working memory and allowing those representations to be updated. Catecholamine, particularly dopamine, transmission has been proposed to modulate the balance between the stability and flexibility of working memory representations. However, it is unclear whether drugs that increase catecholamine transmission, such as methylphenidate, optimize this balance in a task-dependent manner or bias the system toward stability at the expense of flexibility (or vice versa). Here we demonstrate, using pharmacological fMRI, that methylphenidate improves the ability to resist distraction (cognitive stability) but impairs the ability to flexibly update items currently held in working memory (cognitive flexibility). These behavioral effects were accompanied by task-general effects in the striatum and opposite and task-specific effects on neural signal in the pFC. This suggests that methylphenidate exerts its cognitive enhancing and impairing effects through acting on the pFC, an effect likely associated with methylphenidate's action on the striatum. These findings highlight that methylphenidate acts as a double-edged sword, improving one cognitive function at the expense of another, while also elucidating the neurocognitive mechanisms underlying these paradoxical effects.
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Dan Simon & Stephen Spiller
Psychological Science, forthcoming
Abstract:
We explore how preferences for attributes are constructed when people choose between multiattribute options. As found in prior research, we observed that while people make decisions, their preferences for the attributes in question shift to support the emerging choice, thus enabling confident decisions. The novelty of the studies reported here is that participants repeated the same task 6 to 8 weeks later. We found that between tasks, preferences returned to near their original levels, only to shift again to support the second choice, regardless of which choice participants made. Similar patterns were observed in a free-choice task (Study 1) and when the favorableness of options was manipulated (Study 2). It follows that preferences behave in an elastic manner: In the absence of situational pressures, they rest at baseline levels, but during the process of reaching a decision, they morph to support the chosen options. This elasticity appears to facilitate confident decision making in the face of decisional conflict.