Decision Under Risk

Fox, Craig R.; Erner, Carsten; Walters, Daniel J.

doi:10.1002/9781118468333.ch2

Cited by 22 publications

(16 citation statements)

References 198 publications

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“…Why does this happen? Decision under risk has been one of the most lively and interdisciplinary topics in judgment and decision making (Fox et al, 2015; Loewenstein et al, 2001). Despite the rich literature on this topic, we know little about how an extreme exogenous shock such as the COVID-19 pandemic might influence people’s general risk attitude in their daily lives.…”

mentioning

confidence: 99%

Risky but alluring: Severe COVID-19 pandemic influence increases risk taking.

Tsai¹,

Zeng²

2021

Journal of Experimental Psychology: Applied

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The COVID-19 pandemic has changed our lives to a profound extent. In this research, we examined how the pandemic might have influenced people's general risk attitude in their daily lives. Across four studies (two preregistered) using U.S. online worker and Canadian university student samples, we observed that individuals who were severely affected by the pandemic showed higher risk taking toward a variety of risky activities than those who were less severely affected. We attributed this effect to elevated boredom levels and increased perceived benefits from taking risks among the severely affected group and provided supporting evidence. Data ruled out risk perception, income, employment status, and response biases as alternative explanations. Our findings shed light on the psychological consequences of the COVID-19 pandemic, decision under risk, the role of perceived benefits of risk taking, and effective policy interventions. Public Significance StatementThis study shows that people who have been severely affected by the COVID-19 pandemic are more likely to engage in risky activities relative to those less severely affected. This is because pandemic-related restrictions imposed on people are linked with elevated boredom levels and greater perceived benefits of risk taking within the severely affected group. Because the aforementioned factors differ from risk perception, a typical driver of risk taking behavior, policies aimed at curbing risky behaviors arising from the pandemic should target these factors specifically.

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confidence: 99%

Risky but alluring: Severe COVID-19 pandemic influence increases risk taking.

Tsai¹,

Zeng²

2021

Journal of Experimental Psychology: Applied

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“…Knowingly, negotiations are "fuzzy situations that are full of uncertainties and ambiguities" ( [108], p. 608). While the impact of uncertainty on individual decision-making has been largely investigated (for a review see [185]), only a little is known about the systematic effects of uncertainty on negotiation behaviors and outcomes (for exceptions, see [186,187]). Only a few studies have investigated the use of integrative tactics relative to distributive tactics when payoffs were uncertain [188], uncertainty as a potential cause of negotiation failure [189,190], and emphasized the importance of "a careful assessment of the sources of uncertainty in a negotiation" ( [191], p. 109).…”

Section: Uncertainty In Negotiations On Common Resource Dilemmasmentioning

confidence: 99%

From Claiming to Creating Value: The Psychology of Negotiations on Common Resource Dilemmas

et al. 2022

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Current sustainability challenges often reflect common resource dilemmas where peoples’ short-term self-interests are at odds with collective interests in the present and future. In this article, we highlight the key role of joint decision-making processes in negotiations to facilitate the management of common resource dilemmas and to promote the transition toward sustainability. By reflecting on psychological drivers and barriers, we argue that the limited availability, the restricted accessibility, and the dynamic alterability of resources in negotiations on common resource dilemmas may cause a myopic mindset that fosters value claiming strategies and, ultimately, results in distributive-consumptive negotiation outcomes. To promote value creation in negotiations on common resource dilemmas, we argue that agents must perform a mindset shift with an inclusive social identity on a superordinate group level, an embracive prosocial motivation for other parties’ interests at and beyond the table, and a forward-looking cognitive orientation towards long-term consequences of their joint decisions. By shifting their mindset from a myopic towards a holistic cognitive orientation, agents may explore negotiation strategies to create value through increasing the availability, improving the accessibility, and using the alterability of resources. Applying these value creation strategies may help achieve integrative-transformative negotiation outcomes and promote sustainable agreements aimed at intersectional, interlocal, and intergenerational justice. We conclude by discussing additional psychological factors that play a pivotal role in negotiations on common resource dilemmas as well as further developments for future research.

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“…Risk aversion is the tendency of human and non-human decision-makers to choose smaller certain options over larger risky ones (Fox et al, 2015; Holt and Laury, 2002; Rabin and Thaler, 2001). While the population on average is risk averse, there is considerable variability in the individual strength of this tendency, and some people display risk-neutral or even risk-seeking behaviour (Bruhin et al, 2010; von Gaudecker et al, 2011).…”

Section: Introductionmentioning

confidence: 99%

Individual risk attitudes arise from noise in neurocognitive magnitude representations

Garcia

Hollander

Grueschow

et al. 2022

Preprint

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Humans are generally risk averse: they prefer options with smaller certain outcomes over those with larger uncertain ones. This risk aversion is classically explained with a concave utility function, meaning that successive increases in monetary payoffs should increase subjective valuations by progressively smaller amounts. Here, we provide neural and behavioural evidence that risk aversion may also arise from a purely perceptual bias: The noisy logarithmic coding of numerical magnitudes can lead individuals to underestimate the size of larger monetary payoffs, leading to apparent risk aversion even when subjective valuation increases linearly with the estimated amount. A formal model of this process predicts that risk aversion should systematically increase when individuals represent numerical magnitudes more noisily. We confirmed this prediction by measuring both the mental and neural acuity of magnitude representations during a purely perceptual task and relating these measures to individual risk attitudes during separate financial decisions. Computational model fitting suggested that subjects based both types of choices on similar mental magnitude representations, with correlated precision across the separate perceptual and risky choices. Increased stimulus noise due to the presentation format of risky outcomes led to increased risk aversion, just as predicted by the model. The precision of the underlying neural magnitude representations was estimated with a numerical population receptive field model fitted to the fMRI data of the perceptual task. Subjects with more precise magnitude representations in parietal cortex indeed showed less variable behaviour and less risk-aversion in the separate financial choices. Our results highlight that individual patterns of economic behaviour may, at least partially, be determined by capacity limitations in perceptual processing rather than by processes that assign subjective values to monetary rewards.

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Decision Under Risk

Cited by 22 publications

References 198 publications

Risky but alluring: Severe COVID-19 pandemic influence increases risk taking.

Risky but alluring: Severe COVID-19 pandemic influence increases risk taking.

From Claiming to Creating Value: The Psychology of Negotiations on Common Resource Dilemmas

Individual risk attitudes arise from noise in neurocognitive magnitude representations

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