Thinking styles and risky decision-making

Abstract (via Kanchan Mukherjee)

People usually overweight small probabilities and underweight large probabilities leading to the familiar inverse S-shaped weighting function. This research explores the link between affect and the structure of probability weighting from the perspective of thinking dispositions, a concept central to dual system theories of reasoning. The effects of affective priming and cognitive load on both probability weighting and the value function are also examined. The evidence suggests that thinking styles do have predictive implications for risky decision-making. Participants with a more affective thinking style tend to be more risk-seeking in small probability gambles. However, increasing access to the affective system by affective priming or cognitive load manipulations tend to reduce risk-seeking behavior in small probability gambles as well as reduce risk averse behavior in large probability gambles. Previous research, manipulating the affective nature of lottery outcomes, found evidence for an increase in curvature (more overweighting of small probabilities and more underweighting of large probabilities) of the weighting function for affect-rich outcomes, lending support to a hope-and-fear deconstruction of probability weighting. The present research suggests that increased anticipatory emotions characterized by the elevation of the weighting function (more overweighting at all probabilities) is also important and could sometimes be more significant than hope-and-fear in decision-making under risk. An integrated approach incorporating the impact of affect on all three, the elevation and curvature of probability weighting as well as the curvature of the value function explains the empirical findings.

Click Here To Read: Thinking styles and risky decision-making

About Miguel Barbosa

I run this site.

01. June 2010 by Miguel Barbosa
Categories: Behavioral Economics, Curated Readings | Leave a comment

Leave a Reply

Required fields are marked *