Feedback and winning-losing probability effects on economic behavior in risky choices decision-making

Abstract

Myopic Loss Aversion (MLA) is one of the study objects of behavioral economics. It corresponds to the fact that participants, when facing choice situations, cannot rationally evaluate the risks and profits of available options, leading them to choose investments more likely to occur but less profitable. This behavior shows that they cannot evaluate the options satisfactorily, so they have sub-optimal decisions. There may be conditions for MLA more favorable for it to occur, as the frequency one shows the participant the outcomes of their choices (feedback) and the probability of winning or losing. In this way, this study aims to evaluate how feedback influences participants' choices and the influence and interaction of the winning and losing probability. This study had the participation of 80 people, ages 18 to 30 years, all university students, 29 women and 51 men, without either relation to business degree courses or familiarity with the research area on economic behavior. The experiment consisted in making nine repeated choices in a lottery game. Participants started the experiment with R$1000 (a thousand) fictitious reais (Brazilian currency); each lottery game had a cost of 150 reais, and the profits returned this invested value with an addition of more 150 reais. The results indicate that the presence of feedback induces participants to bet more. However, the winning and losing probability do not influence the invested amount, and there was no interaction between these two factors.