Observers penalize decision makers whose risk preferences are unaffected by loss–gain framing

Dorison, C. A., & Heller, B. H. (2022). 

Journal of Experimental Psychology: 

General. Advance online publication.

Abstract

A large interdisciplinary body of research on human judgment and decision making documents systematic deviations between prescriptive decision models (i.e., how individuals should behave) and descriptive decision models (i.e., how individuals actually behave). One canonical example is the loss–gain framing effect on risk preferences: the robust tendency for risk preferences to shift depending on whether outcomes are described as losses or gains. Traditionally, researchers argue that decision makers should always be immune to loss–gain framing effects. We present three preregistered experiments (N = 1,954) that qualify this prescription. We predict and find that while third-party observers penalize decision makers who make risk-averse (vs. risk-seeking) choices when choice outcomes are framed as losses, this result reverses when outcomes are framed as gains. This reversal holds across five social perceptions, three decision contexts, two sample populations of United States adults, and with financial stakes. This pattern is driven by the fact that observers themselves fall victim to framing effects and socially derogate (and financially punish) decision makers who disagree. Given that individuals often care deeply about their reputation, our results challenge the long-standing prescription that they should always be immune to framing effects. The results extend understanding not only for decision making under risk, but also for a range of behavioral tendencies long considered irrational biases. Such understanding may ultimately reveal not only why such biases are so persistent but also novel interventions: our results suggest a necessary focus on social and organizational norms.

From the General Discussion

But what makes an optimal belief or choice? Here, we argue that an expanded focus on the goals decision makers themselves hold (i.e., reputation management) questions whether such deviations from rational-agent models should always be considered suboptimal. We test this broader theorizing in the context of loss-gain framing effects on risk preferences not because we think the psychological dynamics at play are

unique to this context, but rather because such framing effects have been uniquely influential for both academic discourse and applied interventions in policy and organizations. In fact, the results hold preliminary implications not only for decision making under risk, but also for extending understanding of a range of other behavioral tendencies long considered irrational biases in the research literature on judgment and decision making (e.g., sunk cost bias; see Dorison, Umphres, & Lerner, 2021).

An important clarification of our claims merits note. We are not claiming that it is always rational to be biased just because others are. For example, it would be quite odd to claim that someone is rational for believing that eating sand provides enough nutrients to survive, simply because others may like them for holding this belief or because others in their immediate social circle hold this belief. In this admittedly bizarre case, it would still be clearly irrational to attempt to subsist on sand, even if there are reputational advantages to doing so—that is, the costs substantially outweigh the reputational benefits. In fact, the vast majority of framing effect studies in the lab do not have an explicit reputational/strategic component at all. 

A pdf is here.

When Helping Is Risky: The Behavioral and Neurobiological Trade-off of Social and Risk Preferences

Gross, J., Faber, N. S., et al.  (2021).

Psychological Science, 32(11), 1842–1855.

https://doi.org/10.1177/09567976211015942

Abstract

Helping other people can entail risks for the helper. For example, when treating infectious patients, medical volunteers risk their own health. In such situations, decisions to help should depend on the individual’s valuation of others’ well-being (social preferences) and the degree of personal risk the individual finds acceptable (risk preferences). We investigated how these distinct preferences are psychologically and neurobiologically integrated when helping is risky. We used incentivized decision-making tasks (Study 1; N = 292 adults) and manipulated dopamine and norepinephrine levels in the brain by administering methylphenidate, atomoxetine, or a placebo (Study 2; N = 154 adults). We found that social and risk preferences are independent drivers of risky helping. Methylphenidate increased risky helping by selectively altering risk preferences rather than social preferences. Atomoxetine influenced neither risk preferences nor social preferences and did not affect risky helping. This suggests that methylphenidate-altered dopamine concentrations affect helping decisions that entail a risk to the helper.

From the Discussion

From a practical perspective, both methylphenidate (sold under the trade name Ritalin) and atomoxetine (sold under the trade name Strattera) are prescription drugs used to treat attention-deficit/hyperactivity disorder and are regularly used off-label by people who aim to enhance their cognitive performance (Maier et al., 2018). Thus, our results have implications for the ethics of and policy for the use of psychostimulants. Indeed, the Global Drug Survey taken in 2015 and 2017 revealed that 3.2% and 6.6% of respondents, respectively, reported using psychostimulants such as methylphenidate for cognitive enhancement (Maier et al., 2018). Both in the professional ethical debate as well as in the general public, concerns about the medical safety and the fairness of such cognitive enhancements are discussed (Faber et al., 2016). However, our finding that methylphenidate alters helping behavior through increased risk seeking demonstrates that substances aimed at changing cognitive functioning can also influence social behavior. Such “social” side effects of cognitive enhancement (whether deemed positive or negative) are currently unknown to both users and administrators and thus do not receive much attention in the societal debate about psychostimulant use (Faulmüller et al., 2013).

The research is here.

The Most Common Pain Relief Drug in The World Induces Risky Behavior, Study Finds

Peter Dockrill

sciencealert.com

Originally published 18 NOV 21

Acetaminophen, also known as paracetamol and sold widely under the brand names Tylenol and Panadol, also increases risk-taking, according to a study published in 2020 that measured changes in people's behavior when under the influence of the common over-the-counter medication.

"Acetaminophen seems to make people feel less negative emotion when they consider risky activities – they just don't feel as scared," neuroscientist Baldwin Way from The Ohio State University explained last year.

"With nearly 25 percent of the population in the US taking acetaminophen each week, reduced risk perceptions and increased risk-taking could have important effects on society."

The findings add to a recent body of research suggesting that acetaminophen's effects on pain reduction also extend to various psychological processes, lowering people's receptivity to hurt feelings, experiencing reduced empathy, and even blunting cognitive functions.

Similarly, Way's study suggests people's affective ability to perceive and evaluate risks can be impaired when they take acetaminophen. While the effects might be slight, they're definitely worth noting, given acetaminophen is the most common drug ingredient in America, found in over 600 different kinds of over-the-counter and prescription medicines.

(cut)

Overall, however, based on an average of results across the various tests, the team concludes that there is a significant relationship between taking acetaminophen and choosing more risk, even if the observed effect can be slight.

That said, they acknowledge the drug's apparent effects on risk-taking behavior could also be interpreted via other kinds of psychological processes, such as reduced anxiety, perhaps.

The info is here.

'The robot made me do it': Robots encourage risk-taking behaviour in people

Press Release

University of Southampton

Originally released 11 Dec 20

New research has shown robots can encourage people to take greater risks in a simulated gambling scenario than they would if there was nothing to influence their behaviours. Increasing our understanding of whether robots can affect risk-taking could have clear ethical, practiCal and policy implications, which this study set out to explore.

Dr Yaniv Hanoch, Associate Professor in Risk Management at the University of Southampton who led the study explained, "We know that peer pressure can lead to higher risk-taking behaviour. With the ever-increasing scale of interaction between humans and technology, both online and physically, it is crucial that we understand more about whether machines can have a similar impact."

This new research, published in the journal Cyberpsychology, Behavior, and Social Networking, involved 180 undergraduate students taking the Balloon Analogue Risk Task (BART), a computer assessment that asks participants to press the spacebar on a keyboard to inflate a balloon displayed on the screen. With each press of the spacebar, the balloon inflates slightly, and 1 penny is added to the player's "temporary money bank". The balloons can explode randomly, meaning the player loses any money they have won for that balloon and they have the option to "cash-in" before this happens and move on to the next balloon.

One-third of the participants took the test in a room on their own (the control group), one third took the test alongside a robot that only provided them with the instructions but was silent the rest of the time and the final, the experimental group, took the test with the robot providing instruction as well as speaking encouraging statements such as "why did you stop pumping?"

The results showed that the group who were encouraged by the robot took more risks, blowing up their balloons significantly more frequently than those in the other groups did. They also earned more money overall. There was no significant difference in the behaviours of the students accompanied by the silent robot and those with no robot.

The pressor is here.

Higher emotional intelligence leads to better decision-making

Press Release
mcguffin@rotman.utoronto.ca
University of Toronto, Rotman School of Management

Toronto – The anxiety people feel making investment decisions may have more to do with the traffic they dealt with earlier than the potential consequences they face with the investment, but not if the decision-maker has high emotional intelligence a recent study published in Psychological Science suggests.

The study shows that understanding the source and relevance of emotions influences how much sway they have over individuals' decision-making and can affect the willingness to take risks.

"People often make decisions that are influenced by emotions that have nothing to do with the decisions they are making," says Stéphane Côté, a professor at the University of Toronto's Rotman School of Management, who co-wrote the study with lead researcher Jeremy Yip of the Wharton School of the University of Pennsylvania. "Research has found that we fall prey to this all the time.

"People are driving and it's frustrating," says Prof. Côté. "They get to work and the emotions they felt in their car influences what they do in their offices. Or they invest money based on emotions that stem from things unrelated to their investments. But our investigation reveals that if they have emotional intelligence, they are protected from these biases."

The study's first experiment showed that participants with lower levels of emotional understanding allowed anxiety unrelated to decisions they were making concerning risk influence these decisions. Those with higher emotional intelligence did not.

The entire press release is here.

Risk and Reward Are Processed Differently in Decisions Made Under Stress

By Mara Mather and Nichole R. Lighthall

Current Directions in Psychological Science

February 2012, vol. 21, no. 1, pp 36-41.

Abstract

Years of research have shown that stress influences cognition. Most of this research has focused on how stress affects memory and the hippocampus. However, stress also affects other regions involved in cognitive and emotional processing, including the prefrontal cortex, striatum, and insula. New research examining the impact of stress on decision processes reveals two consistent findings. First, acute stress enhances selection of previously rewarding outcomes but impairs avoidance of previously negative outcomes, possibly due to stress-induced changes in dopamine in reward-processing brain regions. Second, stress amplifies gender differences in strategies used during risky decisions, as males take more risk and females take less risk under stress. These gender differences in behavior are associated with differences in activity in the insula and dorsal striatum, brain regions involved in computing risk and preparing to take action.

Beginning of the article:

The word stress describes experiences that are emotionally or physiologically challenging (McEwen, 2007). Stressful experiences elicit sympathetic-nervous-system responses and stimulate the release of stress hormones (e.g., cortisol in humans; Sapolsky, 2004) that mobilize the body's resources to respond to a challenge. The physiological effects of a stressful experience such as making a speech are evident not only during the event, but also in the next hour or so (Dickerson & Kemeny, 2004). When stressors are constantly present or anxiety about potential stressors is high, stress levels may become chronically elevated. Beyond the physiological effects of stress, a substantial literature indicates that both acute and chronic stress affect cognitive function.

Until recently, most studies examining stress and cognition have focused on stress effects on memory; effects on other aspects of cognition, including decision making, have received less attention. However, it is crucial to understand whether and how stress may alter decision making, as important decisions are often made under stress. For example, decisions about finances, health care, and social relationships are frequently accompanied by stress or cause stress. Early work on stress and decision making determined that stressors like time pressure and noise impaired decision making, resulting in decision making that is hurried, unsystematic, and lacking full consideration of options (Janis & Mann, 1977).

More recent work focuses on how stress influences how people respond to the risks and rewards of decisions. Acute stress potentiates dopaminergic reward pathways in the brain (Ungless, Argilli, & Bonci, 2010), which may intensify the allure of potential gains associated with decision options. The core brain-body feedback loops involved in the stress response also are involved in assessing risk and reward (Bechara & Damasio, 2005). As part of this brain-body feedback system, the insula helps represent somatic states and signals the probability of aversive outcomes during risky decisions (Clark et al., 2008). Both physical and psychological stress activate the insula, but differently for males and females (Naliboff et al., 2003; Wang et al., 2007).

In the following sections, we review recent evidence for two distinct effects of stress. First, stress enhances learning about positive choice outcomes and impairs learning about negative choice outcomes. This effect appears to be similar across gender and age groups. Second, stress affects decision strategies differently for males and females, with behavior diverging under stress when decision making involves immediate risk taking.

---------------------------------------

The article and abstract are here.

This article is pertinent to ethical decision-making while experiencing stress and anxiety.

Special thanks to Ken Pope for this information.