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Tribute to Sarah: The Queen of Risk

Tribute to Sarah: The Queen of Risk. Lichtenstein, S. (1965). Bases for preferences among three-outcome bets. Journal of Experimental Psychology , 69, 162-169. Slovic, P., & Lichtenstein, S. (1968a). Importance of variance preferences In gambling decisions. Journal of

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Tribute to Sarah: The Queen of Risk

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  1. Tribute to Sarah:The Queen of Risk Lichtenstein, S. (1965). Bases for preferences among three-outcome bets. Journal of Experimental Psychology, 69, 162-169. Slovic, P., & Lichtenstein, S. (1968a). Importance of variance preferences In gambling decisions. Journal of Experimental Psychology, 78, 646-654. Slovic, P., & Lichtenstein, S. (1968b). Relative importance of probabilities And payoffs in risk-taking. Journal of Experimental Psychology Monograph ,78. Lichtenstein, S., & Slovic, P. (1971). Reversals of preference between bids and choices in gambling decisions. Journal of Experimental Psychology, 89, 46-55.

  2. Review of Preference Reversals with Bets • Stimuli: P-betsand $ bets. • Win $2 with p = .80 • Lose $1 with p = .20 • Or • Win $9 with p = .20 • Lose $.50 with p = .80 • Two responses: Choice and Minimum Selling Prices (WTA) • Preference Reversals: • P-bets preferred with choice response mode. • $-bets preferred with pricing response mode. • Replicated, replicated, and replicated, and extended to other types of problems. • What is going on? Anchoring and insufficient adjustment in the pricing task. • Preferences depend on how you ask the question (procedural variance).

  3. Three Contributions of Sarah • Contingent Decision Behavior • “The most important empirical results of the period under review have shown the sensitivity of judgment and choice to seemingly minor changes in tasks”(Einhorn & Hogarth, 1981). • Shafer (1986), the failure of decisions to be invariant across procedures and descriptions is “the most fundamental result of three decades of empirical investigation” in behavioral decision-making. • Constructed Preferences (and Beliefs) • Preferences for and beliefs about objects or events of any complexity are often constructed – not merely revealed – in the generation of a response to a judgment or choice task. • The construction process will be shaped by the interaction between properties of the decision maker (including the use of multiple heuristics) and the properties of the decision task. • At its core the construction process involves selective attention. The information that is selected can be part of the external environment (stimulus-based) and/or drawn from memory. The selectivity reflects “bounded rationality”. • Choice Architecture • The construction (measurement) of preferences is a form of “architecture”, that is, building a sturdy and “defensible” set of values (Gregory, Lichtenstein, & Slovic, 1993). • Since attention both reflects and shapes preferences, managing attention is both a problem and an opportunity for good choice architecture. The scarce resource for decision making is attention.

  4. Three More Contributions of Sarah • Methods • Three-outcome gambles and Duplex gambles. • Regression and Bayesian modeling of judgment. • Replication of results in the field. • Concern for public policies. • Risk perceptions. • Comparable worth. • Environmental valuations of non-market goods. • Mentoring of young BDR researchers, including John Payne.

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