scholarly journals The framing of nothing and the psychology of choice

2019 ◽  
Vol 59 (2) ◽  
pp. 125-149 ◽  
Author(s):  
Marc Scholten ◽  
Daniel Read ◽  
Neil Stewart
Keyword(s):  
Decision Making ◽  
Prospect Theory ◽  
Intertemporal Choice ◽  
Intrinsic Value ◽  
Mental Accounting ◽  
Risky Choice ◽  
Shared Understanding ◽  
Accounting Model ◽  
Zero Effect ◽  
Double Entry

AbstractZero outcomes are inconsequential in most models of choice. However, when disclosing zero outcomes they must be designated. It has been shown that a gamble is judged to be more attractive when its zero outcome is designated as “losing $0” rather than “winning $0,” an instance of what we refer to as the mutable-zero effect. Drawing on norm theory, we argue that “losing $0” or “paying $0” evokes counterfactual losses, with which the zero outcome compares favorably (a good zero), and thus acquires positive value, whereas “winning $0” or “receiving $0” evokes counterfactual gains, with which the zero outcome compares unfavorably (a bad zero), and thus acquires negative value. Moreover, we propose that the acquired value of zero outcomes operates just as the intrinsic value of nonzero outcomes in the course of decision making. We derive testable implications from prospect theory for mutable-zero effects in risky choice, and from the double-entry mental accounting model for mutable-zero effects in intertemporal choice. The testable implications are consistently confirmed. We conclude that prevalent theories of choice can explain how decisions are influenced by mutable zeroes, on the shared understanding that nothing can have value, just like everything else.

5. Risky choices

2017 ◽  
pp. 49-66
Author(s):  
Michelle Baddeley
Keyword(s):  
Decision Making ◽  
Prospect Theory ◽  
Expected Utility Theory ◽  
Mental Accounting ◽  
Lottery Ticket ◽  
Risk And Uncertainty ◽  
The Road ◽  
Risky Choices ◽  
Accounting Model ◽  
Isolation Effects

When we decide to cross the road, buy a lottery ticket, or invest our money, the decision involves risk and uncertainty. ‘Risky choices’ looks at how economists usually think of risk as quantifiable—in the form of expected utility theory—but behavioural economists challenge this understanding of risk. Daniel Kahneman and Amos Tversky developed prospect theory, which could incorporate the anomalous behaviour identified by the Allais and Ellsberg Paradoxes. They argued that any decision-making theory should be able to explain the certainty, reflection, and isolation effects. Alternatives to prospect theory include Richard Thaler’s mental accounting model and the regret theory of Graham Loomes and Robert Sugden.

scholarly journals Past trauma and future choices: differences in discounting in low-income, urban African Americans

2018 ◽  
Vol 48 (16) ◽  
pp. 2702-2709 ◽  
Author(s):  
Carissa van den Berk-Clark ◽  
Joel Myerson ◽  
Leonard Green ◽  
Richard A. Grucza
Keyword(s):  
Decision Making ◽  
African Americans ◽  
Low Income ◽  
Substance Dependence ◽  
Intertemporal Choice ◽  
Severe Trauma ◽  
Risky Choice ◽  
Traumatic Experiences ◽  
Post Traumatic Stress ◽  
Underlying Mechanisms

AbstractBackgroundExposure to traumatic events is surprisingly common, yet little is known about its effect on decision making beyond the fact that those with post-traumatic stress disorder are more likely to have substance-abuse problems. We examined the effects of exposure to severe trauma on decision making in low-income, urban African Americans, a group especially likely to have had such traumatic experiences.MethodParticipants completed three decision-making tasks that assessed the subjective value of delayed monetary rewards and payments and of probabilistic rewards. Trauma-exposed cases and controls were propensity-matched on demographic measures, treatment for psychological problems, and substance dependence.ResultsTrauma-exposed cases discounted the value of delayed rewards and delayed payments, but not probabilistic rewards, more steeply than controls. Surprisingly, given previous findings that suggested women are more affected by trauma when female and male participants’ data were analyzed separately, only the male cases showed steeper delay discounting. Compared with nonalcoholic males who were not exposed to trauma, both severe trauma and alcohol-dependence produced significantly steeper discounting of delayed rewards.ConclusionsThe current study shows that exposure to severe trauma selectively affects fundamental decision-making processes. Only males were affected, and effects were observed only on discounting delayed outcomes (i.e. intertemporal choice) and not on discounting probabilistic outcomes (i.e. risky choice). These findings are the first to show significant differences in the effects of trauma on men's and women's decision making, and the selectivity of these effects has potentially important implications for treatment and also provides clues as to underlying mechanisms.

Perceptions and Framing of Risk, Uncertainty, Loss, and Failure in Entrepreneurship

2014 ◽  
Vol 3 (2) ◽  
pp. 1-17
Author(s):  
Kimberly M. Green
Keyword(s):  
Decision Making ◽  
Prospect Theory ◽  
Risk Taking ◽  
Organizational Innovation ◽  
Mental Accounting ◽  
Reference Points ◽  
Future Research ◽  
Perceptions Of Risk ◽  
Learning From Failure ◽  
Innovation And Change

Research indicates that perceptions of risk and loss affect decision-making. Entrepreneurship presents a context in which risk, failure, and loss frequently frame decisions. This paper presents a review of the entrepreneurship literature that is grounded in Kahneman and Tversky's 1979 article on prospect theory. The theory's contribution to the understanding of how the framing of losses affects decisions offers a useful foundation for considering streams of research in entrepreneurship and small business, given that the prospects for loss and failure are high in these endeavors. This review identifies 79 articles and organizes them into four broad themes: risk-taking perspectives of the entrepreneur and stakeholders, aspirations and reference points, organizational innovation and change, and learning from failure. The review concludes by considering the future research potential in the topics of regret, mental accounting, and an understanding of competitors.

scholarly journals Perceptions and Framing of Risk, Uncertainty, Loss, and Failure in Entrepreneurship

Economics ◽  
2015 ◽  
pp. 126-144
Author(s):  
Kimberly M. Green
Keyword(s):  
Decision Making ◽  
Small Business ◽  
Prospect Theory ◽  
Organizational Innovation ◽  
Mental Accounting ◽  
Reference Points ◽  
Future Research ◽  
Perceptions Of Risk ◽  
Learning From Failure ◽  
Innovation And Change

Research indicates that perceptions of risk and loss affect decision-making. Entrepreneurship presents a context in which risk, failure, and loss frequently frame decisions. This paper presents a review of the entrepreneurship literature that is grounded in Kahneman and Tversky's 1979 article on prospect theory. The theory's contribution to the understanding of how the framing of losses affects decisions offers a useful foundation for considering streams of research in entrepreneurship and small business, given that the prospects for loss and failure are high in these endeavors. This review identifies 79 articles and organizes them into four broad themes: risk-taking perspectives of the entrepreneur and stakeholders, aspirations and reference points, organizational innovation and change, and learning from failure. The review concludes by considering the future research potential in the topics of regret, mental accounting, and an understanding of competitors.

scholarly journals Is Zero Void? Attentional Mechanism of Hidden-zero Effect in Risky Decision-making

2019 ◽  
Author(s):  
lei zhou ◽  
Lei Zhang ◽  
Yin Su ◽  
Zhu-Yuan Liang
Keyword(s):  
Decision Making ◽  
Eye Movement ◽  
Attentional Bias ◽  
Risky Choice ◽  
Risky Decision Making ◽  
Risky Decision ◽  
Choice Preference ◽  
Model Combining ◽  
Zero Effect ◽  
Zero Condition

The frame of risky choice could alter and shape an individual’s risky preferences. Within an option of typical risky choice, that is, "p% chance to win Q dollar," naturally embedded a hidden-zero outcome, namely, "(1-p)% chance to win 0 dollar." Despite its pervasive existence, there is insufficient evidence of the existence or a cognitive mechanism of the hidden-zero effect in risky choice. To this end, we proposed an attentional based risk-aversion model for behavior and process level to interpret the mechanism of the hidden-zero effect. We presented participants’ explicit or hidden-zero outcomes in pairs of certain versus risky options and measured their choice preferences and eye-movement characteristics. We observed that participants were less risk avoidant in the explicit-zero condition than in the hidden-zero condition, and a descriptive attentional bias shifted this preference to favor certain options in the hidden-zero condition (Study 1). We further combined the eye-tracking data with hierarchical Bayesian modeling (Study 2). We observed that a model combining behavioral and process attention provided better predictions regarding participants’ preference. When presenting zero outcomes, an empirical attentional bias integrating eye-movement features indicated that attention plays a central role to alter the attention allocation and consequent choice preference from certainty options to risky options in risky decision-making. These findings highlight the potential mechanism of the hidden-zero effect in risk decision-making on cognitive and computational levels.

scholarly journals Shifting uncertainty intolerance: methylphenidate and attention-deficit hyperactivity disorder

2021 ◽  
Vol 11 (1) ◽  
Author(s):  
Alekhya Mandali ◽  
Arjun Sethi ◽  
Mara Cercignani ◽  
Neil A. Harrison ◽  
Valerie Voon
Keyword(s):  
Decision Making ◽  
Attention Deficit Hyperactivity Disorder ◽  
Attention Deficit ◽  
Computational Models ◽  
Risky Choice ◽  
Risk Tolerance ◽  
Healthy Population ◽  
Hyperactivity Disorder ◽  
Risky Choices ◽  
Cardinal Symptom

AbstractRisk evaluation is a critical component of decision making. Risk tolerance is relevant in both daily decisions and pathological disorders such as attention-deficit hyperactivity disorder (ADHD), where impulsivity is a cardinal symptom. Methylphenidate, a commonly prescribed drug in ADHD, improves attention but has mixed reports on risk-based decision making. Using a double-blinded placebo protocol, we studied the risk attitudes of ADHD patients and age-matched healthy volunteers while performing the 2-step sequential learning task and examined the effect of methylphenidate on their choices. We then applied a novel computational analysis using the hierarchical drift–diffusion model to extract parameters such as threshold (‘a’—amount of evidence accumulated before making a decision), drift rate (‘v’—information processing speed) and response bias (‘z’ apriori bias towards a specific choice) focusing specifically on risky choice preference. Critically, we show that ADHD patients on placebo have an apriori bias towards risky choices compared to controls. Furthermore, methylphenidate enhanced preference towards risky choices (higher apriori bias) in both groups but had a significantly greater effect in the patient population independent of clinical scores. Thus, methylphenidate appears to shift tolerance towards risky uncertain choices possibly mediated by prefrontal dopaminergic and noradrenergic modulation. We emphasise the utility of computational models in detecting underlying processes. Our findings have implications for subtle yet differential effects of methylphenidate on ADHD compared to healthy population.

scholarly journals Decision-making in complex health care situations: Shared understanding, experimenting, reflecting and learning

2021 ◽  
pp. 205343452110087
Author(s):  
Antoinette T Reerink ◽  
Jet Bussemaker ◽  
C Bastiaan Leerink ◽  
Jan AM Kremer
Keyword(s):  
Health Care ◽  
Decision Making ◽  
Support Network ◽  
Health Conditions ◽  
Shared Understanding ◽  
Complex Problems ◽  
Strong Focus

People who have complex problems affecting multiple areas of their lives need a different approach than people who have singular health conditions. They benefit more from an effectively cooperating support network that explores appropriate ways of providing assistance, rather than a strong focus on outcome-based care.

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