Risk-defusing In Decisions With Multiple Alternatives FUR XII ROMA 2006

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Risk-defusing In Decisions With Multiple Alternatives

FUR XII ROMA 2006

Odilo W. Huber,Arlette Bär, Oswald HuberDepartment of Psychology

University of FribourgSwitzerland

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Outline

Behavior in quasi-naturalistic risky decisions

Risk Defusing Operator (RDO)

Study

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Quasi-naturalisitic risky scenario: Parcel enterprise

For some months now you are heading a dependance of a big parcel enterprise in a big city. However, your storage room is limited and you expect the number of parcels at christmas time to be too high to be handled easily. Thus you announce for additional storage room. You get 8 offers but you do not know neither the suitability nor possible risks.

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Behavior in quasi-naturalistic risky decisions

In experiments with quasi-realistic scenarios, decision behaviour

differs in two main respects from that in decisions among gambles:

1. The majority of decision-makers usually are not actively interested in probability information

2. 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).

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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).

Active and constructive behaviour, effort needed to invent action

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Research Questions

1. How do decision makers construct a representation of a quasi-naturalistic risky decision with multiple alternatives?

2. Role of risk defusing in the process?

Paradigm necessary that allows investigation of process and constructive acts of decision maker

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Method of Active Information Search AIS O. Huber, R. Wider & O. W. Huber (1997)

Presentation of the decision problem is actively controlled by the decision maker

information search

Sponataneous information needs investigated

No prestructuring of information by the experimenter

no dimension labels as in MDDM (e.g. mouselab)

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Method of Active Information Search AIS O. Huber, R. Wider & O. W. Huber (1997)

Information needs of decision maker allow inferences on

1. mental representation of decision problem

2. process of construction of mental representationProcess tracing method

Needs pre-experiments to test tasks and standardize answers

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Method of Active Information Search AIS O. Huber, R. Wider & O. W. Huber (1997)

Scenario

Question 1

Answer 1

Q. 2

A. 2

Q. n

A. n

etc.

Information given by experimenter

Actions of decision maker

DECISION

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Hypotheses

1. Process will be economic, i.e. subjects will try to limit information search.

2. Subjects will eliminate some alternatives based on possible positive consequences.

3. Exploration of risk and invention of RDOs only for remaining subset No resources are spent on risk control of less promising alternatives.

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Predicted Process

Decision

Exploration: positive consequences / suitability

Classification

Consideration of RDOs

Exploration: risks / negative consequences

Elimination

RDO-Search / invention

8 alternatives

Subset of alternatives

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Design

198 subjects

Independent Variables

1. Two quasi-naturalistic scenarios with 8 risky alternatives each

A. Pygmäenmaki (protection of endangered monkey species)

B. Parcel enterprise

2. Positive consequences (highly positive vs. positive; within tasks)

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Design continued

3. Initially presented information concerning alternatives (for all alternatives, 4, no information; one information item each)

4. Type of initially presented information concerning alternatives (positive consequences / suitability vs. possible risk / negative consequences or mixed)

3. and 4. allow testing of stability of proposed strategy under different initial information conditions (ante active search)Important for generalization of results

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Type of initially presented information

pos. cons very pos. cons neg. cons

Number of alternatives

with respective

information initially

presented

no information no information no information

no information no information 8

4 no information 4

no information 4 4

2 2 4

no information no information 8

no information no information no information

4 4 no information

no information no information 8

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Results

Majority of decisions (64.4%) predicted strategydecision makers first investigated positive consequences / suitability for all 8 alternatives and subsequently eliminated less positive alternatives, subsequently RDO search

Decision

Exploration: positive consequences / suitability

Classification

Consideration of RDOs

Exploration: risks / negative consequences

Elimination

RDO-Search / invention

8 alternatives

Subset of alternatives

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12.9% of decisions: first investigation of positive consequences, and then investigation of negative consequences without elimination of alternatives, subsequently RDO search.

Decision

Exploration: positive consequences / suitability

Classification

Consideration of RDOs

Exploration: risks / negative consequences

Elimination

RDO-Search / invention

ClassificationElimination

8 alternatives

Subset of alternatives

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10.4%: Elimation based on positive consequences, no RDO search.

Decision

Exploration: positive consequences / suitability

Classification

Consideration of RDOs

Exploration: risks / negative consequences

Elimination

RDO-Search / inventionConsideration of

negative consequences

8 alternatives

Subset of alternatives

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Results continued

12.3% Non-classified strategies

3.8% Probability search (combined with different strategies)

No difference between initial information conditions

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General Discussion

Proposed economical strategy is applied by a majority of the subjects in decision situations as investigated:

A. unknown suitability of multiple risky alternativesB. no presentation of dimension labels, no prestructuring of search process by experimentator

Elimination based on positive consequences early in process

Risk evalutation only for subset

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General Discussion

RDOs are central to decision: 89% of decisions

RDO invention is applied economically late in decision process for subset of alternatives.

Probability search plays minor role

22 different conditions as combinations of the 3 factors have been investigated Strategy is stable under different initial

information conditions.

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Thanks!