Risk-defusing and the initial attractiveness of alternatives

1. Risk-defusing and the initial attractiveness of alternatives Arlette S. Baer Odilo W. Huber Oswald Huber arlette.baer@unifr.ch FUR XII 2006 / Roma University of Fribourg/Switzerland

2. Outline • Theoretical considerations • Risk Defusing Operator (RDO) • Pre-event RDO • Post-event RDO • Study • Main research question • Hypothesis • Method • Results • Discussion University of Fribourg/Switzerland

3. Theoretical Considerations • Representational coherence In experiments with quasi-realistic scenarios, decision behaviour differs in two main respects from that in decisions among gambles: • The majority of decision-makers usually are not actively interested in probability information • Often, risk-defusing behaviour plays a central role in the decision process (O. Huber, R. Wider & O. W. Huber, 1997; O. Huber & O. W. Huber, 2003b). University of Fribourg/Switzerland

4. Risk Defusing Operator • A risk defusing operator (RDO) is an action intended by the decision maker to be performed in addition to a specific alternative and is expected to decrease the risk (O. Huber, Beutter, Montoya & O. W. Huber, 2001; O. Huber, 2004; in press). University of Fribourg/Switzerland

5. Before the negative event Negative event Risky decision situation Negative consequence Vaccination Infection Trip to a tropical country Die • Pre-event RDO Example: Vaccination University of Fribourg/Switzerland

6. after the negative event Medical treatment Negative event Infection Risky decision situation Trip to a tropical country Negative consequence Die • Post-event RDO Example: Medical treatment University of Fribourg/Switzerland

7. Study • Research QuestionIn the present experiment the following main research question has been investigated: Does the initial appraisal of the attractiveness of the alternatives influence the search for risk defusing operators? University of Fribourg/Switzerland

8. Hypothesis The attractiveness of alternatives as given in an initial scenario description influences the active search for risk defusing operators: • we expect enhanced search for more attractive alternatives • we expect subjects to further evaluate alternatives that appear to be promising trough an initial appraisal University of Fribourg/Switzerland

9. Method • Participants 60 subjects (5 non-students of different professions and 55 students) • Independent Variables • Initial attractiveness of the alternative (attractive versus non-attractive) • Three quasi-naturalistic scenarios • TV-concept (Warm-up scenario) • Pygmäenmaki (monkeys) • Packet enterprise • Dependent Variables • Search for risk defusing operators • Decision University of Fribourg/Switzerland

10. Decision Scenarios Each scenario consists of: • a short description of the risky scenario • two risky alternatives • positive consequencestwo levels: positive and very positive • possible negative consequencestwo levels: negative and very negative University of Fribourg/Switzerland

11. Method of Active Information Search • The subject is given a description of the risky scenario. • The subject then can get additional information by asking questions to the experimenter. • The experimenter answers a question by providing information in printed form (O. Huber, Wider & O. W. Huber, 1997). University of Fribourg/Switzerland

12. Manipulation of the initial attractiveness: Variation of negative vs. positive consequences. Example shows conditions Alternative (Alt) A superior University of Fribourg/Switzerland

13. Ambiguous Condition University of Fribourg/Switzerland

14. Results For the initially attractive alternative participants search massively more often for risk defusing operators than for the initially non-attractive alternative. University of Fribourg/Switzerland

15. If participants search for a risk defusing operator and find an acceptable one, they choose the alternative (96.3% with search in attractive alternative; initially “non-attractive” alternative: 86.7%). University of Fribourg/Switzerland

16. Discussion This experiment supplies three elementary results: • A. The manipulation of the attractiveness both by variation of the positive consequences and the possible negative consequences is effective. • B. In the initially attractive alternative decision makers search more often for risk defusing operators than in the initially non-attractive alternative. In the ambiguous condition we assumed the decision maker to search more often for risk defusing operators in the alternative with less negative consequences due to loss aversion; we expected the difference in positive consequences not to neutralize loss aversion. Actually, decision makers evaluate the alternative with less possible negative consequences as more attractive. University of Fribourg/Switzerland

17. Discussion • C. Successful search for a risk defusing operator is a good predictor for choice. This result agrees with previous results (Huber et al., 2001; Huber and Bär, in press). These results confirm the assumption that evaluation and elaboration of the representation in the decision process aren’t separated phases. This assumption is contradictory to Prospect Theory which assumed two separated phases (Kahneman & Tversky, 1979; Tversky & Kahneman, 1992). University of Fribourg/Switzerland

18. Thank you for your attention arlette.baer@unifr.ch University of Fribourg/Switzerland