Differences in information searching in risk judgment between sophisticated and non sophisticated subjects. Agata Michalaszek Joanna Sokolowska
Dec 18, 2015
Differences in information searching in risk judgment between sophisticated and
non sophisticated subjects.
Agata MichalaszekJoanna Sokolowska
Perceived risk
• What is perceived risk?
• people do not need more explanation to judge riskiness
• risk rates are consistant
• no common definition of perceived risk
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Perceived risk
two major point of controversy:
1. the relative input of positive and negative information into risk judgment
2. the relative input of payoffs and probabilities into risk judgment
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R–V Models – Markowitz:
• decisions are based on both expected return and its uncertainty or variability (related to risk) (Markowitz, 1959)
• risk is associated with the dispersion of the random variable
• risk as indepedent concept
WTP(x) = f {V(x), R(x)}
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Perceived risk as dispersion
• X1: [+10, 50%; -10, 50%]
• X2: [+20, 50%; -10, 50%]
• X3: [+10, 50%; -20, 50%]
R(x1) < R(x2)=R(x3)
Subjects’ rates: R(x2) < R(x1) < R(x3)5
Input of negative outcome into risk judgment is more important
Positive information
• In everyday language:– emphasise negative connotation to the possibility of
outcomes – underline extra rewards that can be gained only at the
price of uncertainty and possible loss
• Proverbs:– uncertainty (‘do not buy a pig in a poke’) – possible loss (‘gold may be bought to dear’)– necessary condition of success (‘nothing ventured, nothing
gained’)
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Payoffs vs. probabilities
Risk jugdment:
• Probabilities are more important in experiments
• Values are more important in real life situations– difficult to asses probability in everyday activities
• Open questions – few about probabilities, much more about payoffs in different categories(Tyszka and Zaleskiewicz, 2006)
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Payoffs vs. probabilities
Methodology:• different scales for payoffs and probabilities
Resolution approach:
• provide with vague magnitude of payoffs and probabilities
• use process tracing method – Mouselab
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Vague information
• in USA new virus of dangerous flu is spreading
• it is necessary to rate riskiness of a purchase of the various vaccines for employees
• both vaccines are safe in the same way and have the same price
• differences with:seriousness of negative effectsprobability of those effects
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Vague information
Precise information:• 5% chances of negative effects• $45 costs
Imprecise information:• Vaccine A Vaccine B• 3-7% chances of negative 5% chances of negative
effects effects• $75 costs $45-105 costs
(Kuhn and Budescu,1996)10
Process tracing method
• investigating the process by investigating which information is used by people when judging risk
• Information:– type– amount– order – reaction time
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Educational background
Empirical findings:• people in general use incorrect representation of
random events• gambler’s fallacy• law of small numbers• subaaditivity of probability for complementary
events • conjunction fallacy
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Educational background
• people cannot get information about probability in real life
‘expert’s’ group:• people who are trained to use probabilistic
representation of reality• greater knowlegde of mathematics and statistics• more sensitive to probabilities
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Research questions and hypothesis
• What is the relative input of information about payoffs and probabilities into risk judgment?
• Information about negative aspects of a risky situation impact risk judgment more than information about positive aspects.
• Training in statistics and mathematics enhanced the relative importance of information about probabilities in risk judgment (and has no impact on relative importance of information about positive and negative aspects).
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Experiment - design
• respondents were presented with 6 different risky situations related to financial risk
• every situation consisted of 3 alternative options (A, B, C)
• each option consisted of 5 possible outcomes – 2 losses, break even, 2 gains– 2 losses, 3 gains
• payoffs were quantitative
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Experiment - design
• information was presented in the table (Payne, 1976)
• MouseLabWEB (Willemsen and Johnson 2006)
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max gain
pmax
gain
gain pgain gain/0 p(g or 0) loss ploss max loss
pmax loss
A
B
C
http://www.mouselabweb.org/
Experiment - design
• information was hidden behind boxes – to access the information, the decision maker clicked the mouse pointer over the box on the screen
• participants could disclose as much detailed information about the options as necessary
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max gain
pmax
gain
gain pgain gain/0 p(g or 0) loss ploss max loss
pmax loss
A
B
C
Experiment - design
++ p++ + p+ +/0 p+/0 - p- - - p- -
A
B
C
- - p- - - p- +/0 p+/0 + p+ ++ p++
A
B
C
two orders of location of gains and losses
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Experiment - design
• Respondents’ taks – judge riskiness of each option
Measure of perceived risk• subjects rated riskiness on an 11-point scale (from 0 ‘not risky
at all’ to 10 ‘extremely risky’)
• Respondents:NASA group – 75: Polish group – 67: female – 33 female – 35 male – 42 male – 32
0 10
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Results• ca 50% available information• in NASA group more acquired information
(M=19,29; SD=9,74)
F(1, 125)=7,69; p<0,01
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Results• no effect of order• ratio positive/negative
NASA group: Polish group:from 1,13 to 0,91 from 1,02 to 0,91
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F(1, 111)=0,24; p>0,05
Results
• no differences between groups
• the same amount of positive and negative – ratio close to 1
• no correlation:– positive information and risk rates, r=0,07; p>0,05– negtive informatin and risk rates, r=0,01; p>0,05
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Results• ratio value/probability
NASA group: Polish group:from 0,93 to 0,78 from 1,11 to 0,94
F(1, 104)=4,69; p<0,05
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Results
• differences between groups– more payoffs – Polish group – more probabilities – NASA group
• NASA group: Polish group:from 0,93 to 0,78 from 1,11 to 0,94
• more probiabilites considered in NASA group, t(139)=2,76; p<0,01.
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Results – risk rates
• no differences between groups (t(140)=0,28; p>0,05)
• positive correlations between risk rates and information about probabilitiesNASA group: Polish group:r=0,41; p<0,001 r=0,36; p<,01
• more probabilities – higher risk rates
• negative correlation for values25
Conclusions:• In NASA group acquired more information and more
information about probabilities
• In both groups the same amount of positive and negative
• More probabilities – more risky
• Risk rates similar in both grups
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