Ambiguous Outcome Magnitude in Economic Decision Making with Low and High Monetary Stakes

Tomislav Damir Zbozinek, Caroline Juliette Charpentier, Song Qi and Dean Mobbs
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Tomislav Damir Zbozinek: California Institute of Technology

No 5q4g7, OSF Preprints from Center for Open Science

Abstract: Most of life’s decisions involve risk and uncertainty regarding whether reward or loss will follow. A major approach to understanding decision-making under these circumstances comes from economics research. While many economic decision-making experiments have focused on gains/losses and risk (<100% probability of a given outcome), relatively few have studied ambiguity (i.e., uncertainty about the degree of risk or magnitude of gains/losses). Within ambiguity, most studies have focused on ambiguous risk (uncertainty regarding likelihood of outcomes), but few studies have investigated ambiguous outcome magnitude (i.e., uncertainty regarding how small/large the gain/loss will be). In the present report, we investigated the effects of ambiguous outcome magnitude, risk, and gains/losses in an economic decision-making task with low stakes (Study 1; $3.60-$5.70; N = 367) and high stakes (Study 2; $6-$48; N = 210) using the same participants in Study 2 as in Study 1. We conducted computational modeling to determine individuals’ preferences/aversions for ambiguous outcome magnitudes, risk, and gains/losses. Our results show that increasing stakes increases ambiguous gain aversion, unambiguous loss aversion, and unambiguous risk aversion, but increases ambiguous loss preference. These results suggest that as stakes increase, people tend to avoid uncertainty and loss in most domains but prefer ambiguous loss.

Date: 2021-04-02
New Economics Papers: this item is included in nep-cbe, nep-cmp, nep-exp and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:5q4g7

DOI: 10.31219/osf.io/5q4g7

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