Risk dishabituation: In repeated gambling, risk is reduced following low-probability “surprising” events (wins or losses).

Abstract

In path-dependent risk taking, like playing a slot machine, the wager on one trial may be affected by the outcome of the preceding trial. Previous studies have shown that a person's risk-taking preferences may change as a result of the preceding trial (win or loss). For example, the "house money effect" suggests that risk taking may increase after a win, whereas the "break even effect" posits that risk taking increases after a loss. Independent of those findings, a person's emotional state has been found to influence risk taking. For example, the "mood maintenance hypothesis" supports the notion that positive affect decreases risk taking, and related research finds that increased negative affect increases risk taking. Because winning and losing may influence one's emotional state, we sought to investigate how both previous outcomes, as well as a person's emotional responses to those outcomes, independently influence subsequent risk taking. To do this, data were collected using three simplified slot machines where the chance of winning each trial was set to 13%, 50%, and 87%, respectively. Evidence for the break even and house money effects were found on the 13% and 87% games, respectively. Likewise, emotional valence was found to predict risk taking on these two tasks, with emotional valence fully explaining the break even effect observed on the 13% game. In addition to these results, the present research revealed that risk taking is reduced following low-probability ("surprising") events (i.e., a win in the 13% condition or loss in the 87% condition). Dubbed "risk dishabituation," this phenomenon is discussed, along with its likely corresponding emotional experience--surprise.

Dynamic changes in the use of online advice in response to task success or failure

“…Although some authors might suggest that negative emotion would lead to departures from rational play (Browne 1989;Demaree et al 2012;Leith and Baumeister 1996;Post et al 2008;Rosecrance 1987), there was little indication that this occurred in the present study. Instead, a 'big loss' was associated with greater changes in expectations or confidence as indicated by wagers (Feather 1966;Feather and Saville 1967), and behaviour that was apparently more rational.…”

“…A win can confirm a person's belief in his or her ability (Chau and Phillips 1995), and where this belief is unwarranted, it can encourage risk-taking (Fischhoff, Slovic, and Lichtenstein 1977) and promote unrealistic expectations of future gain (Custer and Milt 1985;Lesieur and Custer 1984). The phenomenon has been elsewhere characterised as the 'house money effect' (Demaree et al 2012;Post et al 2008;Thaler and Johnson 1990). On this basis, a 'big win' would be expected to encourage heedlessness and trigger departures from rational strategies indicated by advice.…”

“…Negative mood engendered by loss has been reported to lead to a greater risk-taking (Demaree et al 2012;Leith and Baumeister 1996;Post et al 2008). This has been called the 'break even' effect (Demaree et al 2012;Post et al 2008), as greater amounts are hazarded in an attempt to recoup previous losses.…”

“…Arkes, Herren, and Isen 1988;Demaree et al 2012;Leith and Baumeister 1996;Post et al 2008). Studies find that prior success or failure (Feather 1966;Post et al 2008) can alter a person's affect and subsequent behaviour (Zimmerman, Sambrook, and Gore 2014).…”

“…This has been called the 'break even' effect (Demaree et al 2012;Post et al 2008), as greater amounts are hazarded in an attempt to recoup previous losses. Bad mood and frustration appear to be associated with risk-taking and self-defeating behaviour (Leith and Baumeister 1996).…”