The mathematics of downside financial risk can be difficult to understand: For example a 50% loss requires a subsequent 100% gain to break-even. A given percentage loss always requires a greater percentage gain to break-even. Instead, many non-expert investors may assume for example that a 50% gain is sufficient to offset a 50% loss. Over 3,498 participants and five experiments, the widespread illusion that a sequence of equal percentage gains and losses produces a zero overall return was demonstrated. Participants continued to err frequently, even with percentage returns of +/-100%, or when financially incentivized. Financial literacy, numeracy, and deliberation were all shown to independently contribute to accurate performance. These results have implications for promoting the understanding of downside financial risk.

Two experiments explored how the context of recently experiencing an abundance of positive or negative outcomes within a series of choices influences risk preferences. In each experiment, choices were made between a series of pairs of hypothetical 50/50 two-outcome gambles. Participants experienced a control set of mixed outcome gamble pairs intermingled with a randomly assigned set of (a) all-gain, (b) all-loss, or (c) a mixture of all-gain and all-loss gamble pairs. In both experiments, a positive experience led to reduced risk taking in the control set and a negative experience led to increased risk taking. These patterns persisted even after the all-gain and all-loss gamble pairs were no longer present. In addition, we showed that the good luck attributed to positive experiences was associated with decreased, rather than increased, risk taking. These results ran counter to the house money effect, and could not readily be accounted for by changes in assets. We suggest that the goals associated with the predominant valence are likely to be assimilated and applied to other choices within a given situation. We also discuss the need to learn more about the characteristics of choice bracketing and mental accounting that influence which aspects of situational context will be included or excluded from consideration when making each choice.

Proportion responding (PR) is the preference for proportionally higher gains, such that the same absolute quantity is valued more as the reference group decreases. This research investigated this kind of proportion PR in decisions about saving lives (e.g., saving 10/10 lives is preferred to saving 10/100 lives). The results of two studies suggest that PR does not stem from an overall tendency to choose higher proportions, but rather from faulty deliberative reasoning. In particular, people who display PR are less likely to engage in deliberative reflection as measured by response time, the Process Dissociation Procedure, the Cognitive Reflection Test, a numeracy test, and a task assessing denominator neglect. This association between faulty deliberation and PR was observed only when choosing the highest proportion was non-normative because it came at the expense of absolute gains (e.g., saving 10/10 lives is preferred to saving 11/100 lives). These results help to make sense of discrepant findings in previous research, pertaining to how PR relates to biased reasoning and decision making.

We demonstrate that the desirability bias, the elevation of the estimated likelihood of a preferred event, can be due in part to the desire for consistency between the preference for the favored event and its predicted likelihood. An experiment uses a participant’s favorite team in Major League Baseball games and a recently devised method for priming the consistency goal. When preference is the first response, priming cognitive consistency moves prediction toward greater agreement with that preference, thereby increasing the desirability bias. In contrast, when prediction is the first response, priming cognitive consistency facilitates greater agreement with the factual information for each game. This increases the accuracy of the prediction and reduces the desirability bias.

Every day, people struggle to make healthy eating decisions. Nutrition labels have been used to help people properly balance the tradeoff between healthiness and taste, but research suggests that these labels vary in their effectiveness. Here, we investigated the cognitive mechanism underlying value-based decisions with nutrition labels as modulators of value.

More specifically, we used a binary decision task between products along with two different nutrition labels to examine how salient, color-coded labels, compared to purely information-based labels, alter the choice process. Using drift-diffusion modeling, we investigated whether color-coded labels alter the valuation process, or whether they induce a simple stimulus-response association consistent with the traffic-light colors irrespective of the features of the item, which would manifest in a starting point bias in the model. We show that color-coded labels significantly increased healthy choices by increasing the rate of preference formation (drift rate) towards healthier options without altering the starting point. Salient labels increased the sensitivity to health and decreased the weight on taste, indicating that the integration of health and taste attributes during the choice process is sensitive to how information is displayed. Salient labels proved to be more effective in altering the valuation process towards healthier, goal-directed decisions.

How do people make decisions between an immediate but small reward and a delayed but large one? The outcome of such decisions indicates that people discount rewards by their delay and hence these outcomes are well described by discounting functions. However, to understand irregular decisions and dysfunctional behavior one needs models which describe how the process of making the decision unfolds dynamically over time: how do we reach a decision and how do sequential decisions influence one another? Here, we present an attractor model that integrates into and extends discounting functions through a description of the dynamics leading to a final choice outcome within a trial and across trials. To validate this model, we derive qualitative predictions for the intra-trial dynamics of single decisions and for the inter-trial dynamics of sequences of decisions that are unique to this type of model. We test these predictions in four experiments based on a dynamic delay discounting computer game where we study the intra-trial dynamics of single decisions via mouse tracking and the inter-trial dynamics of sequences of decisions via sequentially manipulated options. We discuss how integrating decision process dynamics within and across trials can increase our understanding of the processes underlying delay discounting decisions and, hence, complement our knowledge about decision outcomes.

I present a novel way to conceptualize Turiel and colleagues’ Social Domain Theory (SDT), and Haidt and colleagues’ Moral Foundations Theory (MFT), as theories of how concepts of moral violations are mentally represented. I argue that SDT is best viewed as a theory of the features that are associated with concepts of moral violations, including wrongness, generalizability across cultures, and intrinsic harmfulness, and that MFT, in contrast, is best viewed as a theory of individual differences in what kinds of acts are categorized as moral violations (i.e., of category membership). This perspective generates a novel prediction: the same individual difference variables that predict variation in moral values according to MFT should predict ascription of the features predicted by SDT. That is, judgments of wrongness, generalizability, and intrinsic harmfulness should covary with the same predictors as do endorsed moral values, specifically, political orientation and analytic thinking. Three studies supported this hypothesis.

The heuristics-and-biases research program highlights reasons for expecting people to be poor intuitive forecasters. This article tests the power of a cognitive-debiasing training module (“CHAMPS KNOW”) to improve probability judgments in a four-year series of geopolitical forecasting tournaments sponsored by the U.S. intelligence community. Although the training lasted less than one hour, it consistently improved accuracy (Brier scores) by 6 to 11% over the control condition. Cognitive ability and practice also made largely independent contributions to predictive accuracy. Given the brevity of the training tutorials and the heterogeneity of the problems posed, the observed effects are likely to be lower-bound estimates of what could be achieved by more intensive interventions. Future work should isolate which prongs of the multipronged CHAMPS KNOW training were most effective in improving judgment on which categories of problems.

Economic games offer a convenient approach for the study of prosocial behavior. As an advantage, they allow for straightforward implementation of different techniques to reduce socially desirable responding. We investigated the effectiveness of the most prominent of these techniques, namely providing behavior-contingent incentives and maximizing anonymity in three versions of the Trust Game: (i) a hypothetical version without monetary incentives and with a typical level of anonymity, (ii) an incentivized version with monetary incentives and the same (typical) level of anonymity, and (iii) an indirect questioning version without incentives but with a maximum level of anonymity, rendering responses inconclusive due to adding random noise via the Randomized Response Technique. Results from a large (N = 1,267) and heterogeneous sample showed comparable levels of trust for the hypothetical and incentivized versions using direct questioning. However, levels of trust decreased when maximizing the inconclusiveness of responses through indirect questioning. This implies that levels of trust might be particularly sensitive to changes in individuals’ anonymity but not necessarily to monetary incentives.