scholarly journals Unrealistic optimism and decision making

Psihologija ◽  
2009 ◽  
Vol 42 (4) ◽  
pp. 567-584
Author(s):  
Bojana Bozovic ◽  
Vasilije Gvozdenovic
Keyword(s):  
Decision Making ◽  
Expected Utility ◽  
Framing Effect ◽  
Risk Averse ◽  
Subjective Probabilities ◽  
Unrealistic Optimism ◽  
Decision Making Under Risk ◽  
Risk Seeking ◽  
Individual Decisions ◽  
Descriptive Theories

One of the leading descriptive theories of decision-making under risk, Tversky & Kahneman's Prospect theory, reveals that normative explanation of decisionmaking, based only on principle of maximizing outcomes expected utility, is unsustainable. It also underlines the effect of alternative factors on decision-making. Framing effect relates to an influence that verbal formulation of outcomes has on choosing between certain and risky outcomes; in negative frame people tend to be risk seeking, whereas in positive frame people express risk averse tendencies. Individual decisions are not based on objective probabilities of outcomes, but on subjective probabilities that depend on outcome desirability. Unrealistically pessimistic subjects assign lower probabilities (than the group average) to the desired outcomes, while unrealistically optimistic subjects assign higher probabilities (than the group average) to the desired outcomes. Experiment was conducted in order to test the presumption that there's a relation between unrealistic optimism and decision-making under risk. We expected optimists to be risk seeking, and pessimist to be risk averse. We also expected such cognitive tendencies, if they should become manifest, to be framing effect resistant. Unrealistic optimism scale was applied, followed by the questionnaire composed of tasks of decision-making under risk. Results within the whole sample, and results of afterwards extracted groups of pessimists and optimists both revealed dominant risk seeking tendency that is resistant to the influence of subjective probabilities as well as to the influence of frame in which the outcome is presented.

scholarly journals Normative and descriptive theories of decision making under risk

2014 ◽  
Vol 57 (4) ◽  
pp. 25-50 ◽  
Author(s):  
Kaja Damnjanovic ◽  
Ivana Jankovic
Keyword(s):  
Decision Making ◽  
Expected Utility ◽  
Utility Theory ◽  
Developmental Stages ◽  
Expected Utility Theory ◽  
Decision Making Process ◽  
Decision Making Under Risk ◽  
Von Neumann ◽  
Basic Concepts ◽  
Descriptive Theories

The approaches to the decision making process are typically either normative or descriptive. We sketch a historical development of the decision theory, starting with concept of utility that was first introduced by Daniel Bernoulli and then explaining the basic concepts of von Neumann and Morgenstern?s normative expected utility theory (including the basic axioms of rationality). Then we present the descriptively oriented prospect theory of Kahneman and Tversky as a critique of the expected utility theory. We compare these theories and conclude that their historical sequence captures the sequence of the developmental stages of the decision-making process itself. However, normative and descriptive theories are not mutually exclusive.

The first–second language influence on framing effects and loss aversion of balanced bilinguals

2018 ◽  
Vol 24 (2) ◽  
pp. 129-140
Author(s):  
Hanjing Huang ◽  
Pei-Luen Patrick Rau
Keyword(s):  
Decision Making ◽  
Second Language ◽  
Financial Crisis ◽  
Loss Aversion ◽  
Framing Effect ◽  
Framing Effects ◽  
Risk Averse ◽  
Risk Seeking ◽  
Chi Squared ◽  
Language Influence

Aims: We aimed to investigate the effects of language on the decision-making of bilinguals when they possess almost equal proficiencies in these languages. Methodology: Chinese–English bilinguals were asked to make decisions in Chinese or English. In the first experiment, we used a financial crisis problem to investigate the effects of language on the framing effect. In the second experiment, we used two gambling tasks to investigate the effects of language on people’s loss aversion in hypothetical and real bets. Data and analysis: Participants had similar proficiencies in Chinese and in English. Two hundred and twelve Chinese–English bilinguals took part in the first experiment. Their decision data were analysed using chi-squared tests. Ninety-six Chinese–English bilinguals took part in the second experiment. Their decision data were analysed using ANOVA and t-tests. Findings: Framing effects were reduced in the English condition. Chinese–English bilinguals were risk-averse for gains and risk-seeking for losses when choices were presented in Chinese, but this asymmetry disappeared when the choices were presented in English. However, the results indicated that the language did not have significant effects on Chinese–English bilinguals’ loss aversion in hypothetical and real bets. Originality: This is among the first studies to investigate the effects of language on decision-making in balanced bilinguals who have similar proficiencies in different languages. Significance/implications: The findings suggest that language still influences the framing effect, even in balanced bilinguals who have similar proficiencies in different languages.

The effects of optimism on self-framing and risky decision making

2020 ◽  
Vol 48 (10) ◽  
pp. 1-9
Author(s):  
Ran Zhang ◽  
Luming Zhao ◽  
Lin Wu ◽  
Hongxu Chen ◽  
Gaoxing Zhou ◽  
...  
Keyword(s):  
Decision Making ◽  
Framing Effect ◽  
Risky Decision Making ◽  
Risky Decision ◽  
Life Orientation Test ◽  
Life Orientation ◽  
Risk Seeking ◽  
Behavioral Decision Making ◽  
Behavioral Decision ◽  
Orientation Test

The framing effect is a key topic that has been insufficiently studied in research on behavioral decision making. In our study we explored the effects of optimism on self-framing and risky decision making. Participants were 416 undergraduates who responded to the Life Orientation Test and a self-framing test based on the Asian disease problem. The results demonstrate that, compared with people low in optimism, highly optimistic individuals tended to use more positive words to describe problems, generate more positive frames, and choose more risky options. There was also a significant self-framing effect: Participants with a negative frame tended to be risk-seeking, whereas those with a positive frame tended to avoid risks. Additionally, selfframing suppressed the effect of optimism on risky decision making. We can conclude that optimism has significant effects on self-framing and risky decision making.

scholarly journals Support of decision-making under risk by a risk-averse decision-maker

2020 ◽  
Vol 13 ◽  
Author(s):  
Andrzej Łodziński
Keyword(s):  
Decision Making ◽  
Decision Support ◽  
Decision Maker ◽  
The State ◽  
Decision Making Process ◽  
Discrete Problem ◽  
Risk Averse ◽  
Control Parameters ◽  
Decision Making Under Risk ◽  
State Of The Environment

The paper presents the decision support under risk by the risk averse decision maker. Decision making under risk occurs when the result of the decision is not unequivocal and depends on the state of the environment. The decision making process is modeled with the use of multi-criteria optimization. The decision is made by solving the problem with the control parameters that determine the decision maker's aspirations and the evaluation of the solutions received. The decision maker asks the parameter for which the solution is determined. Then, evaluate the solution received accepting or rejecting it. In the second case, the decision maker gives a new parameter value and the problem is solved again for the new parameter. The work includes an simple discrete problem of decision support under risk

Responsibility, Guilt, and Decision under Risk

2003 ◽  
Vol 93 (3_suppl) ◽  
pp. 1077-1079 ◽  
Author(s):  
Francesco Mancini ◽  
Amelia Gangemi
Keyword(s):  
Risk Aversion ◽  
Decision Problem ◽  
Important Determinant ◽  
Framing Effect ◽  
Moral Values ◽  
Risk Averse ◽  
Decision Under Risk ◽  
Risk Seeking ◽  
Gain Loss

We hypothesize that individuals' choices (risk-seeking/risk-aversion) depend on moral values and, in particular, on how subjects evaluate themselves as guilty or as victims of a wrong rather than on the descriptions of the outcomes as given in the options and evaluated accordingly as gains or losses (framing effect). People who evaluate themselves as victims are expected to show a risk-seeking preference (context of innocence). People who evaluate themselves as guilty are expected to show a risk-averse preference (context of guilt). Responses of 232 participants to a decision problem were compared in four different conditions involving two-story formats (innocence/guilt) and two-question-options formats (gain/loss). Regardless of the format of the question options, the story format appears to be an important determinant of individuals' preferences.

Framing Effects in Group Investment Decision Making: Role of Group Polarization

2008 ◽  
Vol 102 (1) ◽  
pp. 283-292 ◽  
Author(s):  
Pi-Yueh Cheng ◽  
Wen-Bin Chiou
Keyword(s):  
Decision Making ◽  
Group Decision Making ◽  
Group Decision ◽  
Investment Decision ◽  
Framing Effects ◽  
Risk Averse ◽  
Group Decisions ◽  
Group Polarization ◽  
Relative Preference ◽  
Individual Decisions

Prospect theory proposes that framing effects result in a preference for risk-averse choices in gain situations and risk-seeking choices in loss situations. However, in group polarization situations, groups show a pronounced tendency to shift toward more extreme positions than those they initially held. Whether framing effects in group decision making are more prominent as a result of the group-polarization effect was examined. Purposive sampling of 120 college students (57 men, 63 women; M age = 20.1 yr., SD = 0.9) allowed assessment of relative preference between cautious and risky choices in individual and group decisions. Findings indicated that both group polarization and framing effects occur in investment decisions. More importantly, group decisions in a gain situation appear to be more cautious, i.e., risk averse, than individual decisions, whereas group decisions in the loss situation appear to be more risky than individual decisions. Thus, group decision making may expand framing effects when it comes to investment choices through group polarization.

scholarly journals Optimizing motor decision-making through competition with opponents

2018 ◽  
Author(s):  
Keiji Ota ◽  
Mamoru Tanae ◽  
Kotaro Ishii ◽  
Ken Takiyama
Keyword(s):  
Decision Making ◽  
Optimal Solution ◽  
Optimal Decision ◽  
Fine Motor ◽  
Risk Averse ◽  
Risk Seeking ◽  
Competitive Game ◽  
Ski Jumping ◽  
Human Motor ◽  
Optimal Decision Making

AbstractAlthough optimal decision-making is essential for sports performance and fine motor control, it has been repeatedly confirmed that humans show a strong risk-seeking bias, selecting a risky strategy over an optimal solution. Despite such evidence, the ideal method to promote optimal decision-making remains unclear. Here, we propose that interactions with other people can influence motor decision-making and improve risk-seeking bias. We developed a competitive reaching game (a variant of the “chicken game”) in which aiming for greater rewards increased the risk of no reward and subjects competed for the total reward with their opponent. The game resembles situations in sports, such as a penalty kick in soccer, service in tennis, the strike zone in baseball, or take-off in ski jumping. In five different experiments, we demonstrated that, at the beginning of the competitive game, the subjects robustly switched their risk-seeking strategy to a risk-averse strategy. Following the reversal of the strategy, the subjects achieved optimal decision-making when competing with risk-averse opponents. This optimality was achieved by a non-linear influence of an opponent’s decisions on a subject’s decisions. These results suggest that interactions with others can alter human motor decision strategies and that competition with a risk-averse opponent is key for optimizing motor decision-making.

scholarly journals ECONOMICS OF RANDOMNESS: BEHAVIORAL ASPECTS OF DECISION MAKING UNDER RISK

2017 ◽  
Vol 9 (2) ◽  
pp. 7-14
Author(s):  
Alexander Krasilnikov
Keyword(s):  
Decision Making ◽  
Risk Analysis ◽  
Uncertainty Analysis ◽  
Expected Utility ◽  
Utility Theory ◽  
Expected Utility Theory ◽  
Probabilistic Methods ◽  
Risk And Uncertainty ◽  
Decision Making Under Risk ◽  
History Of

The paper discusses evolution of the concept of risk in economics. History of probabilistic methods and approaches to risk and uncertainty analysis is considered. Expected utility theory, behavioral approaches, heuristic models and methods of neuroeconomics are analyzed. Author investigates stability of neoclassical program related to risk analysis and suggests further directions of development.

Self–Other Differences in Decision-Making Under Risk

2018 ◽  
Vol 65 (4) ◽  
pp. 226-235 ◽  
Author(s):  
Jingyi Lu ◽  
Xuesong Shang ◽  
Bingjie Li
Keyword(s):  
Decision Making ◽  
Decision Makers ◽  
Risk Averse ◽  
Emotional States ◽  
Decision Making Under Risk ◽  
Behavioral Consequences ◽  
Decisions Under Risk ◽  
Decisions For Others ◽  
Interpersonal Concerns ◽  
Risky Decisions

Abstract. Decisions made for others reflect not only decision-makers’ cognitive and emotional states but also decision-makers’ interpersonal concerns. People who make choices for others will potentially be blamed for unappealing outcomes by others. Therefore, we hypothesize that individuals will seek sure gains (which increase individuals’ responsibility for desirable outcomes) and avoid sure losses (which decrease individuals’ responsibility for undesirable outcomes) when making risky decisions for others more than when making such decisions for themselves. The results of two studies show that making decisions for others (vs. oneself) promotes risk-averse choices over gains. This effect may be driven by the perceived responsibility associated with different options. When both options exhibit variance in outcomes, such self–other difference disappears. However, no self–other difference over losses was observed. Taken together, our research highlights interpersonal concerns in making decisions for others, as well as the behavioral consequences of these concerns in decisions under risk.

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