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

1. Risk-defusing In Decisions With Multiple AlternativesFUR XII ROMA 2006 Odilo W. Huber, Arlette Bär, Oswald Huber Department of Psychology University of Fribourg Switzerland

2. Outline Behavior in quasi-naturalistic risky decisions Risk Defusing Operator (RDO) Study

3. 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.

4. 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: • The majority of decision-makers usually are not actively interested in probability information • 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).

5. 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

6. 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

7. 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)

8. 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 representation Process tracing method Needs pre-experiments to test tasks and standardize answers

9. Method of Active Information Search AIS O. Huber, R. Wider & O. W. Huber (1997) Answer 1 A. 2 A. n Scenario Q. 2 etc. Q. n Question 1 DECISION Information given by experimenter Actions of decision maker

10. Hypotheses • Process will be economic, i.e. subjects will try to limit information search. • Subjects will eliminate some alternatives based on possible positive consequences. • Exploration of risk and invention of RDOs only for remaining subset  No resources are spent on risk control of less promising alternatives.

11. Exploration: positive consequences / suitability Classification Elimination Exploration: risks / negative consequences RDO-Search / invention Consideration of RDOs Decision 8 alternatives Predicted Process Subset of alternatives

12. 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)

13. 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

15. Exploration: positive consequences / suitability Classification Elimination Exploration: risks / negative consequences RDO-Search / invention Consideration of RDOs Decision Majority of decisions (64.4%)  predicted strategy decision makers first investigated positive consequences / suitability for all 8 alternatives and subsequently eliminated less positive alternatives, subsequently RDO search Results 8 alternatives Subset of alternatives

16. 12.9% of decisions: first investigation of positive consequences, and then investigation of negative consequences without elimination of alternatives, subsequently RDO search. Exploration: positive consequences / suitability Classification Elimination Exploration: risks / negative consequences 8 alternatives Classification Elimination RDO-Search / invention Subset of alternatives Consideration of RDOs Decision

17. 10.4%: Elimation based on positive consequences, no RDO search. 8 alternatives Exploration: positive consequences / suitability Classification Elimination Subset of alternatives Exploration: risks / negative consequences Consideration of negative consequences RDO-Search / invention Consideration of RDOs Decision

18. Results continued 12.3% Non-classified strategies 3.8% Probability search (combined with different strategies) No difference between initial information conditions

19. General Discussion • Proposed economical strategy is applied by a majority of the subjects in decision situations as investigated: • A. unknown suitability of multiple risky alternatives • B. 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

20. 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.

21. Thanks!