We examine two departures of individual perceptions of randomness fromprobability theory: the hot hand and the gambler's fallacy, and theirrespective opposites. This paper's first contribution is to use data fromthe field (individuals playing roulette in a casino) to demonstrate theexistence and impact of these biases that have been previously documented in thelab. Decisions in the field are consistent with biased beliefs, although weobserve significant individual heterogeneity in the population. A secondcontribution is to separately identify these biases within a given individual,then to examine their within-person correlation. We find a positive andsignificant correlation across individuals between hot hand and gambler'sfallacy biases, suggesting a common (root) cause of the two related errors. Wespeculate as to the source of this correlation (locus of control), and suggestfuture research which could test this speculation.

This study directly tests the hypothesis that, at least within the domains of food and drink for Americans, the judgment of naturalness has more to do with the history of an object, that is the processes that it has undergone, as opposed to its material content. Individuals rate the naturalness and acceptability of a natural entity (water or tomato paste), that same entity with a first transformation in which a natural substance is added (or some part removed), and then a second transformation in which the natural additive is removed (or the removed part is replaced). The twice transformed entity is stipulated to be identical to the original natural entity, yet it is rated much less natural and less acceptable. It differs from the original entity only in its history (the reversed processes it has experienced). The twice transformed entity is also rated as less natural than the once-transformed entity, even though the former is identical to the original natural entity, and the latter is not. Therefore, naturalness depends heavily on the process-history of an entity.

In a series of recent experiments (Davis, Millner and Reilly, 2005, Eckel andGrossman, 2003, 2005a-c, 2006), matching subsidies generate significantly highercharity receipts than do theoretically equivalent rebate subsidies. This paperreports a laboratory experiment conducted to examine whether the higher receiptsare attributable to a relative preference for matching subsidies or to an“isolation effect” (McCaffery and Baron, 2003, 2006). Somepotential policy implications of isolation effects on charitable contributionsare also considered.

According to regulatory fit theory (Higgins, 2000), when people make decisions with strategies that sustain their regulatory focus orientation, they “feel right” about what they are doing, and this “feeling-right” experience then transfers to subsequent choices, decisions, and evaluations. The present research was designed to link the concept of regulatory fit to functional accounts of counterfactual thinking. In the present study, participants generated counterfactuals about their anagram performance, after which persistence on a second set of anagrams was measured. Under promotion framing (i.e., find 90% or more of all the possible words) upward counterfactual thinking in general elicited larger increases in persistence than did downward counterfactual thinking in general, but under prevention framing (i.e., avoid failing to find 90% or more of all the possible words) upward evaluation (comparing reality to a better reality) elicited larger increases in persistence than did upward reflection (focusing on a better reality), whereas downward reflection (focusing on a worse reality) elicited larger increases in persistence than did downward evaluation (comparing reality to a worse reality). In all, the present findings suggest that the generation of counterfactuals enhances the likelihood that individuals will engage in courses of action that fit with their regulatory focus orientation.

The principle of loss aversion is thought to explain a wide range of anomalousphenomena involving tradeoffs between losses and gains. In this article, I showthat the anomalies loss aversion was introduced to explain - the risky betpremium, the endowment effect, and the status-quo bias - are characterized notonly by a loss/gain tradeoff, but by a tradeoff between the status-quo andchange; and, that a propensity towards the status-quo in the latter tradeoff issufficient to explain these phenomena. Moreover, I show that two basicpsychological principles - (1) that motives drive behavior; and (2) thatpreferences tend to be fuzzy and ill-defined - imply the existence of a robustand fundamental propensity of this sort. Thus, a loss aversion principle isrendered superfluous to an account of the phenomena it was introduced toexplain.

In this article, I will show how several observed biases in human probabilistic reasoning can be partially explained as good heuristics for making inferences in an environment where probabilities have uncertainties associated to them. Previous results show that the weight functions and the observed violations of coalescing and stochastic dominance can be understood from a Bayesian point of view. We will review those results and see that Bayesian methods should also be used as part of the explanation behind other known biases. That means that, although the observed errors are still errors under the laboratory conditions in which they are demonstrated, they can be understood as adaptations to the solution of real life problems. Heuristics that allow fast evaluations and mimic a Bayesian inference would be an evolutionary advantage, since they would give us an efficient way of making decisions.

This paper tests whether logically equivalent risk formats can lead to different health state utilities elicited by means of the traditional standard gamble (SG) method and a modified version of the method that we call “double lottery.” We compare utilities for health states elicited when probabilities are framed in terms of frequencies with respect to 100 people in the population (i.e., X out of 100 who follow a medical treatment will die) with SG utilities elicited for frequencies with respect to 1,000 people in the population (i.e., Y out of 1,000 who follow a medical treatment will die). We found that people accepted a lower risk of death when success and failure probabilities were framed as frequencies type “Y deaths out of 1,000” rather than as frequencies type “X deaths out of 100” and hence the utilities for health outcomes were higher when the denominator was 1000 than when it was 100. This framing effect, known as Ratio Bias, may have important consequences in resource allocation decisions.

This paper proposes a revised version of the original Domain-Specific Risk-Taking(DOSPERT) scale developed by Weber, Blais, and Betz (2002) that is shorter andapplicable to a {broader range of ages, cultures, and educational levels}. Italso provides a French translation of the revised scale. Using multilevelmodeling, we investigated the risk-return relationship between apparent risktaking and risk perception in 5 risk domains. The results replicate previouslynoted differences in reported degree of risk taking and risk perception at themean level of analysis. The multilevel modeling shows, more interestingly, thatwithin-participants variation in risk taking across the 5 content domains of thescale was about 7 times as large as between-participants variation. We discussthe implications of our findings in terms of the person-situation debate relatedto risk attitude as a stable trait.

Across many real-world domains, men engage in more risky behaviors than do women.To examine some of the beliefs and preferences that underlie this difference,657 participants assessed their likelihood of engaging in various riskyactivities relating to four different domains (gambling, health, recreation, andsocial), and reported their perceptions of (1) probability of negative outcomes,(2) severity of potential negative outcomes, and (3) enjoyment expected from therisky activities. Women’s greater perceived likelihood of negativeoutcomes and lesser expectation of enjoyment partially mediated their lowerpropensity toward risky choices in gambling, recreation, and health domains.Perceptions of severity of potential outcomes was a partial mediator in thegambling and health domains. The genders did not differ in their propensitytowards taking social risks. A fifth domain of activities associated with highpotential payoffs and fixed minor costs was also assessed. In contrast to otherdomains, women reported being more likely to engage in behaviors in this domain.This gender difference was partially mediated by women’s more optimisticjudgments of the probability of good outcomes and of outcomes being moreintensely positive.

People are often more likely to accept risky monetary gambles with positive expected values when the gambles will be played more than once. We investigated whether this distinction between single-play and multiple-play gambles extends to medical treatments for individual patients and groups of patients. Resident physicians and medical students (n = 69) and undergraduates (n = 99) ranked 9 different flu shots and a no-flu-shot option in 1 of 4 combinations of perspective (individual patient vs. group of 1000 patients) and uncertainty frame (probability vs. frequency). The rank of the no-flu-shot option (a measure of preference for treatment vs. no treatment) was not significantly related to perspective or participant population. The main effect of uncertainty frame and the interaction between perspective and uncertainty frame approached significance (0.1 > p > 0.05), with the no-flu-shot option faring particularly poorly (treatment faring particularly well) when decisions about many patients were based on frequency information. Undergraduate participants believed that the no-flu-shot option would be less attractive (treatment would be more attractive) in decisions about many patients, but these intuitions were inconsistent with the actual ranks. These results and those of other studies suggest that medical treatments for individuals and groups are not analogous to single-play and multiple-play monetary gambles, perhaps because many people are unwilling to aggregate treatment outcomes over patients in the same way that they would compute net gains or losses over monetary gambles.

When survey respondents rate the quality of life (QoL) associated with a health condition, they must not only evaluate the health condition itself, but must also interpret the meaning of the rating scale in order to assign a specific value. The way that respondents approach this task depends on subjective interpretations, resulting in inconsistent results across populations and tasks. In particular, patients and non-patients often give very different ratings to health conditions, a discrepancy that raises questions about the objectivity of either groups’ evaluations. In this study, we found that the perspective of the raters (i.e., their own current health relative to the health conditions they rated) influences the way they distinguish between different health states that vary in severity. Consistent with prospect theory, a mild and a severe lung disease scenario were rated quite differently by lung disease patients whose own health falls between the two scenarios, whereas healthy non-patients, whose own health was better than both scenarios, rated the two scenarios as much more similar. In addition, we found that the context of the rating task influences the way participants distinguish between mild and severe scenarios. Both patients and non-patients gave less distinct ratings to the two scenarios when each were presented in isolation than when they were presented alongside other scenarios that provided contextual information about the possible range of severity for lung disease. These results raise continuing concerns about the reliability and validity of subjective QoL ratings, as these ratings are highly sensitive to differences between respondent groups and the particulars of the rating task.

Imagine that you have just received a colon cancer diagnosis and need to choosebetween two different surgical treatments. One surgery, the "complicatedsurgery," has a lower mortality rate (16% vs. 20%) but compared to the othersurgery, the "uncomplicated surgery," also carries an additional 1% risk of eachof four serious complications: colostomy, chronic diarrhea, wound infection, oran intermittent bowel obstruction. The complicated surgery dominates theuncomplicated surgery as long as life with complications is preferred overdeath.

In our first survey, 51% of a sample (recruited from the cafeteria of auniversity medical center) selected the dominated alternative, the uncomplicatedsurgery, justifying this choice by saying that the death risks for the twosurgeries were essentially the same and that the uncomplicated surgery avoidedthe risk of complications. In follow-up surveys, preference for theuncomplicated surgery remained relatively consistent (39%-51%) despite (a)presenting the risks in frequencies rather than percents, (b) grouping the 4complications into a single category, or (c) giving the uncomplicated surgery asmall chance of complications as well. Even when a pre-decision "focusingexercise" required people to state directly their preferences between life witheach complication versus death, 49% still chose the uncomplicated surgery.

People’s fear of complications leads them to ignore important differencesbetween treatments. This tendency appears remarkably resistant to debiasingapproaches and likely leads patients to make healthcare decisions that areinconsistent with their own preferences.

Some studies have found that choices become more risk averse after gains and more risk seeking after losses, although other studies have found the opposite. The latter tend to use hypothetical cases that encourage deliberation. In the current study, we examined the effects of prior gains and losses on a task designed to encourage less reflective decision making, the Iowa Gambling Task (IGT). Fifty participants conducted a manipulated decision-making task in which one group gained money, whereas the other group lost money, followed by the IGT. Participants who experienced a prior monetary loss displayed more risky choice behavior on the IGT than subjects who experienced a prior gain. These effects were not mediated by a positive or negative affect, although the sample size may have been too small to detect a small effect.

One of the largest reasons decision-makers make bad decisions (act imprudently)is that the world is full of uncertainty, we feel uncertain about theconsequences of our actions. Participants played a repeated game in whichdecisions were made under various types of uncertainty (either no uncertainty,uncertainty about the present consequences of behaviors, uncertainty about thefuture consequences of behavior, or both types of uncertainty). The gamerequired prudent decision making for success. While playing the game one ofthree types of feedback was placed between trials, either no feedback,behavioral feedback, or behavioral plus outcome feedback. Prudentdecision-making decreased when both types of uncertainty were added. Further,the addition of feedback increased prudent decision-making when futureuncertainty was present. The increase in prudent decisions appears to be fromfeedback’s ability to allow us to create probabilities associated withbehaviors and their consequences, implying that anything that reduces theuncertainty people feel in a world full of uncertainty will increase theirability to make prudent decisions.

This paper extends previous research showing that experienced difficulty ofrecall can influence evaluative judgments (e.g., Winkielman & Schwarz,2001) to a field study of university students rating a course. Studentscompleted a mid-course evaluation form in which they were asked to list either 2ways in which the course could be improved (a relatively easy task) or 10 waysin which the course could be improved (a relatively difficult task). Respondentswho had been asked for 10 critical comments subsequently rated the course morefavorably than respondents who had been asked for 2 critical comments. Aninternal analysis suggests that the number of critiques solicited provides aframe against which accessibility of instances is evaluated. The paper concludeswith a discussion of implications of the present results and possible directionsfor future research.

According to prospect theory, people overweight low probability events and underweight high probability events. Several recent papers (notably, Hertwig, Barron, Weber & Erev, 2004) have argued that although this pattern holds for “description-based” decisions, in which people are explicitly provided with probability distributions over potential outcomes, it is actually reversed in “experience-based” decisions, in which people must learn these distributions through sampling. We reanalyze the data of Hertwig et al. (2004) and present a replication to determine the extent to which their phenomenon can be attributed to sampling error (a statistical rather than psychological phenomenon) versus underestimation of rare events (i.e., judgmental bias) versus actual underweighting of judged probabilities. We find that the apparent reversal of prospect theory in decisions from experience can be attributed almost entirely to sampling error, and are consistent with prospect theory and the two-stage model of decision under uncertainty (Fox & Tversky, 1998).

An experienced decision aider reflects on how misaligned priorities produce decision research that is less useful than it could be. Scientific interest and professional standing may motivate researchers — and their funders and publishers — more powerfully than concern to help people make better

Together with his long-time colleague Daniel Kahneman, Amos Tversky, provided the intellectual infrastructure for contemporary behavioral law and economics. Prospect theory undermines the Coase Theorem, which is the bedrock of traditional law and economics; and the heuristics and biases research questions the fundamental idea of a rational self-interested decisionmaker, which is also challenged by subsequent studies of the role of affect in judgment and decisionmaking.