In this paper, we document a violation of normative and descriptive models of decision making under risk. In contrast to uncertainty effects found by Gneezy, List and Wu (2006), some subjects in our experiments valued lotteries more than the best possible outcome. We show that the overbidding effect is more strongly related to individuals’ competitiveness traits than comprehension of the lottery’s payoff mechanism.

Three experiments tested if individuals show violations of transitivity in choices between risky gambles in linked designs. The binary gambles varied in the probability to win the higher (better) prize, the value of the higher prize, and the value of the lower prize. Each design varied two factors, with the third fixed. Designs are linked by using the same values in different designs. Linked designs allow one to determine if a lexicographic semiorder model can describe violations of transitivity in more than one design using the same parameters. In addition, two experiments tested interactive independence, a critical property implied by all lexicographic semiorder models. Very few people showed systematic violations of transitivity; only one person out of 136 showed violations of transitivity in two designs that could be linked by a lexicographic semiorder. However, that person violated interactive independence, as did the majority of other participants. Most individuals showed systematic violations of the assumptions of stochastic independence and stationarity of choice responses. That means that investigators should evaluate models with respect to response patterns (response combinations) rather than focusing entirely on choice proportions.

Morally challenging decisions tend to be perceived as difficult by decision makers and often lead to post-decisional worry or regret. To test potential causes of these consequences, we employed realistic, morally challenging scenarios with two conflicting choice options. In addition to respondents’ choices, we collected various ratings of choice options, decision-modes employed, as well as physiological arousal, assessed via skin conductance. Not surprisingly, option ratings predicted choice, such that the more positively rated option was chosen. However, respondents’ self-reported decision modes also independently predicted choice. We further found that simultaneously engaging in decision modes that predict opposing choices increased decision difficulty and post-decision worry. In some cases this was related to increased arousal. Results suggest that at least a portion of the negative consequences associated with morally challenging decisions can be attributed to conflict in the decision modes one engages in.

Heuristic decision-making models, like Take-the-best, rely on environmental regularities. They conduct a limited search, and ignore available information, by assuming there is structure in the decision-making environment. Take-the-best relies on at least two regularities: diminishing returns, which says that information found earlier in search is more important than information found later; and correlated information, which says that information found early in search is predictive of information found later. We develop new approaches to determining search orders, and to measuring cue discriminability, that make the reliance of Take-the-best on these regularities clear, and open to manipulation. We then demonstrate, in the well-studied German cities environment, and three new city environments, when and how these regularities support Take-the-best. To do this, we focus not on the accuracy of Take-the-best, as most previous studies have, but on a measure of its coherence as a decision-making process. In particular, we consider whether Take-the-best decisions, based on a single piece of information, can be justified because an exhaustive search for information is unlikely to yield a different decision. Using this measure, we show that when the two environmental regularities are present, the decisions made by limited search are unlikely to have changed after exhaustive search, but that both regularities are often necessary.

Sacred or protected values have important influences on decision making, particularly in the context of intergroup disputes. Thus far, we know little about the process of a value becoming sacred or why one person may be more likely than another to hold a sacred value. We present evidence that participation in religious ritual and perceived threat to the group lead people to be more likely to consider preferences as protected or sacred values. Specifically, three studies carried out with Americans and Palestinians show: (a) that the more people participate in religious ritual the more likely they are to report a preference to be a sacred value (Studies 1–3); (b) that people claim more sacred values when they are reminded of religious ritual (Study 2); and (c) that the effect of religious ritual on the likelihood of holding a sacred value is amplified by the perception of high threat to the in-group (Study 3). We discuss implications of these findings for understanding intergroup conflicts, and suggest avenues for future research into the emergence and spread of sacred values.

We explored how the perspective through which individuals view their actions influences their ethicality, comparing a narrow perspective that allows for evaluation of each choice in isolation, to a broad perspective that promotes an aggregate view of one’s choices. To examine unethical behavior we employed a computerized variation of a trivia game that challenges the player’s integrity because, rather than choosing the correct answer, players indicate whether the correct highlighted answer is the answer they had in mind. In Experiment 1 perspective was modified through the choice procedure: broad perspective evoked by an aggregate decision regarding the upcoming test items and narrow perspective evoked by a segregated decision regarding each upcoming test item. In Experiment 2 perspective was evoked through differential priming. Across both experiments, when given a monetary incentive to succeed, the adoption of a narrow perspective increased cheating, as evidenced by overall higher reported success rates.

Popular culture reflects whatever piques our imagination. Think of the myriad movies and books that take viewers and readers on an imaginary journey to the past or the future (e.g., Gladiator, The Time Machine). Despite the ubiquity of time travel as a theme in cultural expression, the factors that underlie people’s preferences concerning the direction of time travel have gone unexplored. What determines whether a person would prefer to visit the (certain) past or explore the (uncertain) future? We identified three factors that markedly affect people’s preference for (hypothetical) travel to the past or the future, respectively. Those who think of themselves as courageous, those with a more conservative worldview, and—perhaps counterintuitively—those who are advanced in age prefer to travel into the future. We discuss implications of these initial results.

The goal of obtaining information to improve classification accuracy can strongly conflict with the goal of obtaining information for improving payoffs. Two environments with such a conflict were identified through computer optimization. Three subsequent experiments investigated people’s search behavior in these environments. Experiments 1 and 2 used a multiple-cue probabilistic category-learning task to convey environmental probabilities. In a subsequent search task subjects could query only a single feature before making a classification decision. The crucial manipulation concerned the search-task reward structure. The payoffs corresponded either to accuracy, with equal rewards associated with the two categories, or to an asymmetric payoff function, with different rewards associated with each category. In Experiment 1, in which learning-task feedback corresponded to the true category, people later preferentially searched the accuracy-maximizing feature, whether or not this would improve monetary rewards. In Experiment 2, an asymmetric reward structure was used during learning. Subjects searched the reward-maximizing feature when asymmetric payoffs were preserved in the search task. However, if search-task payoffs corresponded to accuracy, subjects preferentially searched a feature that was suboptimal for reward and accuracy alike. Importantly, this feature would have been most useful, under the learning-task payoff structure. Experiment 3 found that, if words and numbers are used to convey environmental probabilities, neither reward nor accuracy consistently predicts search. These findings emphasize the necessity of taking into account people’s goals and search-and-decision processes during learning, thereby challenging current models of information search.

Recent studies have identified the uncertainty effect (UE), whereby risky prospects (e.g., a binary lottery that offers either a $50 or $100 gift certificate) are valued less than their worst possible outcome (a $50 certificate). This effect has been proposed to result from “direct risk-aversion” which posits that the mere uncertainty of a lottery directly decreases its value. However, this effect may also be driven by the potential disappointment inherent in not receiving the better of the two outcomes (disappointment aversion), or the mere fact that the risky prospect is referred to as a “lottery”. The results of two experiments do not support either of these two alternatives. Specifically, the results of Experiment 1 indicate that the UE is observed even when the values of the two lottery outcomes are similar, or even identical. Experiment 2 further replicates the UE in a context in which the word “lottery” is never used (a company promotional). These results are consistent with a direct risk-aversion mechanism (Gneezy et al., 2006; Simonsohn, 2009) and suggest that the UE obtains across a number of different contexts.

Subjects who judged speed in a driving scenario overestimated how fast they could decelerate when speeding compared to when keeping within the speed limit (Svenson, 2009). The purpose of the present studies were to replicate studies conducted in Europe with subjects in the U.S., to study the influence of speed unit (kph vs. mph), affective reactions to outcome (collision) and identity of main actor (driver) on braking speed judgments. The results replicated the European findings and the outcome affective factor (passing a line/killing a child) and the actor factor (subject/driver in general) had significant effects on judgments of braking speed. The results were related to psychological theory and applied implications were discussed.

When making decisions that involve tradeoffs between the quality and timing of desirable outcomes, people consistently discount the value of future outcomes. A puzzling finding regarding such decisions is the extremely high rate at which people discount future monetary outcomes. Most economists would argue that decision-makers should turn down only rates of return that are lower than those available to them elsewhere. Yet the vast majority of studies find discount rates that are significantly higher than market interest rates (Frederick et al., 2002). Here we ask whether a lack of knowledge about the normative strategy can explain high discount rates. In an initial experiment, nearly half of subjects did not spontaneously cite elements of the normative strategy when asked how people should make intertemporal monetary decisions. In two follow-up experiments, after subjects read a “financial guide” detailing the normative strategy, discount rates declined by up to 85%, but were still higher than market interest rates. This decline persisted, though attenuated, for at least one month. In a final experiment, peer-generated advice influenced discount rates in a similar manner to “expert” advice, and arguments focusing on normative considerations were at least as effective as others. These studies show that part of the explanation for high discount rates is a lack of knowledge regarding the normative strategy, and they quantify how much discount rates are reduced in response to normative arguments. Given the high level of discounting that remains, however, there are other contributing factors to high discount rates that remain to be quantified.

The present research investigated the relationship between individual differences in maximizing versus satisficing (i.e., seeking to make the single best choice, rather than a choice that is merely good enough) and well-being, in interaction with the society in which an individual lives. Data from three distinct cultural groups (adults), drawn respectively from the U.S. (N=307), Western Europe (N=263), and China (N=218), were analyzed. The results showed that, in societies where choice is abundant (i.e., U.S. and Western Europe), maximizers reported less well-being than satisficers, and this difference was mediated by experienced regret. However, in the non-western society (China), maximizing was unrelated to well-being. Although in China maximizing was associated with more experiences of regret, regret had no substantial relationship to well-being. These patterns also emerged for the individual facets of the maximizing scale, although with a notable difference between the U.S. and Europe for the High Standards facet. It is argued that, in societies where abundant individual choice is highly valued and considered the ultimate route to personal happiness, maximizers’ dissatisfaction and regret over imperfect choices is a detrimental factor in well-being, whereas it is a much less crucial determinant of well-being in societies that place less emphasis on choice as the way to happiness.

Evidence, anecdotal and scientific, suggests that people treat (or are affected by) products of prestigious sources differently than those of less prestigious, or of anonymous, sources. The “products” which are the focus of the present study are poems, and the “sources” are the poets. We explore the manner in which the poet’s name affects the experience of reading a poem. Study 1 establishes the effect we wish to address: a poet’s reputation enhances the evaluation of a poem. Study 2 asks whether it is only the reported evaluation of the poem that is enhanced by the poet’s name (as was the case for The Emperor’s New Clothes) or the enhancement is genuine and unaware. Finding for the latter, Study 3 explores whether the poet’s name changes the reader’s experience of it, so that in a sense one is reading a “different” poem. We conclude that it is not so much that the attributed poem really differs from the unattributed poem, as that it is just ineffably better. The name of a highly regarded poet seems to prime quality, and the poem becomes somehow better. This is a more subtle bias than the deliberate one rejected in Study 2, but it is a bias nonetheless. Ethical implications of this kind of effect are discussed.

We asked whether people can make their confidence judgments more realistic (accurate) by adjusting them, with the aim of improving the relationship between the level of confidence and the correctness of the answer. This adjustment can be considered to include a so-called second-order metacognitive judgment. The participants first gave confidence judgments about their answers to questions about a video clip they had just watched. Next, they attempted to increase their accuracy by identifying confidence judgments in need of adjustment and then modifying them. The participants managed to increase their metacognitive realism, thus decreasing their absolute bias and improving their calibration, although the effects were small. We also examined the relationship between confidence judgments that were adjusted and the retrieval fluency and the phenomenological memory quality participants experienced when first answering the questions; this quality was one of either Remember (associated with concrete, vivid details) or Know (associated with a feeling of familiarity). Confidence judgments associated with low retrieval fluency and the memory quality of knowing were modified more often. In brief, our results provide evidence that people can improve the realism of their confidence judgments, mainly by decreasing their confidence for incorrect answers. Thus, this study supports the conclusion that people can perform successful second-order metacognitive judgments.

We introduce the Berlin Numeracy Test, a new psychometrically sound instrument that quickly assesses statistical numeracy and risk literacy. We present 21 studies (n=5336) showing robust psychometric discriminability across 15 countries (e.g., Germany, Pakistan, Japan, USA) and diverse samples (e.g., medical professionals, general populations, Mechanical Turk web panels). Analyses demonstrate desirable patterns of convergent validity (e.g., numeracy, general cognitive abilities), discriminant validity (e.g., personality, motivation), and criterion validity (e.g., numerical and non-numerical questions about risk). The Berlin Numeracy Test was found to be the strongest predictor of comprehension of everyday risks (e.g., evaluating claims about products and treatments; interpreting forecasts), doubling the predictive power of other numeracy instruments and accounting for unique variance beyond other cognitive tests (e.g., cognitive reflection, working memory, intelligence). The Berlin Numeracy Test typically takes about three minutes to complete and is available in multiple languages and formats, including a computer adaptive test that automatically scores and reports data to researchers (http://www.riskliteracy.org). The online forum also provides interactive content for public outreach and education, and offers a recommendation system for test format selection. Discussion centers on construct validity of numeracy for risk literacy, underlying cognitive mechanisms, and applications in adaptive decision support.

Decision makers are often ambiguity averse, preferring options with subjectively known probabilities to options with unknown probabilities. The Ellsberg paradox is the best-known example of this phenomenon. Ambiguity has generally been studied in the domain of risky choice, and many theories of ambiguity aversion deal with ambiguity only in this context. However, ambiguity aversion may occur in other contexts. In the present experiment, we examine the effects of ambiguity in intertemporal choice. Subjects imagine they are expecting a package and must choose between two delivery options. Some delivery times are exact. Others are ambiguous, with delivery possible over a range of dates. This problem was structurally identical to the Ellsberg paradox. Subjects showed the same pattern of responses as in the traditional Ellsberg paradox, with each delivery service preferred when it was the unambiguous option. Ambiguity aversion is not specific to risk, but can also occur in other domains.

The endowment effect has been debated for over 30 years. Recent research suggests that differential focus of attention might play a role in shaping preferences. In two studies we investigated the role of biased attention in the emergence of endowment effects. We thereby derive predictions from an extended version of evidence accumulation models by additionally assuming a bias in attentional allocation based on one’s endowment status. We test these predictions against an alternative account in which the endowment effect is the result of initial anchoring and adjustment differences (Sequential Value Matching model; Johnson & Busemeyer, 2005). In both studies we add deliberation time constraints to a standard Willingness-to-Accept/Willingness-to-Pay paradigm and consistently find that the endowment effect grows as deliberation time increases. In Study 2 we additionally use eye tracking and find that buyers focus more on value decreasing attributes than sellers (and vice versa for value increasing attributes). This shift in attention plays a pivotal role in the construction of value and partially mediates the endowment effect.

While risk research focuses on actions that put people at risk, this paper introduces the concept of “passive risk”—risk brought on or magnified by inaction. We developed a scale measuring personal tendency for passive risk taking (PRT), validated it using a 150 undergraduate student sample, and obtained three factors indicating separate domains of passive risk taking: risk involving resources, medical risks and ethical risks. The scale has criterion validity, as it is correlated with reported passive risk taking in everyday life, and also has high test-retest reliability. While correlated with the DOSPERT scale, the PRT shows divergent validity from classic risk taking constructs like sensation seeking, and convergent validity with tendencies previously not linked to risk taking, such as procrastination and avoidance. The results indicate that passive risk is a separate and unique domain of risk taking, which merits further research to understand the cognitive and motivational mechanism perpetuating it.

We compare four different risk-taking propensity measures on their ability to describe and to predict actual risky behavior in the domain of health. The risk-taking propensity measures we compare are: (1) a general measure of risk-taking propensity derived from a one-item survey question (Dohmen et al., 2011), (2) a risk aversion index calculated from a set of incentivized monetary gambles (Holt & Laury, 2002), (3) a measure of risk taking derived from an incentive compatible behavioral task—the Balloon Analog Risk Task (Lejuez et al., 2002), and (4) a composite score of risk-taking likelihood in the health domain from the Domain-Specific Risk Taking (DOSPERT) scale (Weber et al., 2002). Study participants are 351 clients of health centers around Witbank, South Africa. Our findings suggest that the one-item general measure is the best predictor of risky health behavior in our population, predicting two out of four behaviors at the 5% level and the remaining two behaviors at the 10% level. The DOSPERT score in the health domain performs well, predicting one out of four behaviors at the 1% significance level and two out of four behaviors at the 10% level, but only if the DOSPERT instrument contains a hypothetical risk-taking item that is similar to the actual risky behavior being predicted. Incentivized monetary gambles and the behavioral task were unrelated to actual health behaviors; they were unable to predict any of the risky health behaviors at the 10% level. We provide evidence that this is not because the participants had trouble understanding the monetary trade-off questions or performed poorly in the behavioral task. We conclude by urging researchers to further test the usefulness of the one-item general measure, both in explaining health related risk-taking behavior and in other contexts.

The ratio-bias (RB) phenomenon is considered to provide systematic evidence of irrationality. When judging the probability of a low-probability event, many people judge it as less likely when it is expressed as a ratio of small numbers (e.g., 1-in-10) than when it is expressed as a ratio of large numbers (e.g., 10-in-100). Four experiments show that the phenomenon is increased by the experimental paradigm, which misleads subjects regarding the aim of the task by inducing equal-ratio neglect. One factor is constant across the texts of the Experiment 1–3: a particular sentence that induces subjects to neglect the equal ratio and invites them to express feelings about the outcome of the target event rather than giving a rational answer. This intent is strengthened by the formulation of the question (Experiment 1), which explicitly asks the subject to express the feeling connected to the lotteries and the absence of a third option (Experiment 1, 4), the right one, which expresses the “indifference” between the two options. In Experiment 4, the task lacks only the third option, and, simply by adding the option that allows subjects to express the correct answer, the RB disappears.