Instructions on the lab and any information:
Background
Our lives are full of decisions. We must choose what books to read, movies to see, courses to take, person to date, routes to drive, and thousands of other decisions every day. You would hope that people weigh their options carefully and make the best decision possible. Studies in cognitive psychology, however, tell us that the way people make decisions is influenced by a variety of factors. In fact, it is fairly easy to create contexts in which people choose certain options. Many of these tendencies are called “framing effects,” because the perceived context or way the choices are “framed” make a big difference in the decision that is made, even for situations that are otherwise equivalent. Framing effects have been noted for centuries and many were summarized by Kahneman and Tversky (1982).
More information about this lab will be presented in the debriefing.
Instructions
If you have logged in, you’ll see a rectangle below. Make sure that you can see the full area before you begin the lab.
You will be playing a “wheel of fortune” type of game. The wheel will have two parts, one in green which corresponds to what you could win and one in red which corresponds to what you could lose. On some trials, the green area will be larger than the red area, and this indicates that you are more likely to win than lose. On other trials, the green area will be smaller than the red area, and this indicates that you are more likely to lose than win. If the wheel ends up with the pointer (the black triangle at the bottom) in the green section, you win, but if the wheel ends up with the pointer in the red section, you lose.
On each trial, you will be asked to decide between two options. One option is guaranteed and the second option depends on the spin of the wheel. When a trial starts, you’ll see the wheel and also information presented in each corner of the rectangle:
Top Left: This shows the total amount of money you have. It is updated on each trial.
Bottom Left: This shows the probability of winning and losing if you decide to gamble. For example, “75% win $50” and “25% lose $85” means that on this trial, if you choose to gamble, you will win $50 75% of the time and will lose $85 25% of the time. Put another way, three out of every four spins you’d expect to win, and once out of every four spins you’d expect to lose.
Bottom Right: This shows how much you are guaranteed to gain or lose if you choose not to gamble. For example, “Lose $10” means you will lose $10 if you do not gamble; “Gain $200” means you will gain $200 if you do not gamble.
You begin with $1000, and your goal is to end up with as much money as you can. On each trial, your task is to decide whether to gamble or take the sure thing. If you gamble, you could lose or you could win. If you take the sure thing, you will gain or lose the stated amount. There are 32 trials.
At the end of the experiment, you will be asked if you want to save your data to a set of global data. After you answer the question, a new Web page window will appear that includes a debriefing, your data, your group’s data, and the global data.
My summary data:
ou have successfully submitted this activity.
What methods did we employ in this experiment?
On each trial, you were asked to make a choice between (1) a guaranteed outcome or (2) a spin of a wheel. The guarantee could be either a gain or a loss. For the wheel, you were given information about the current odds of winning or losing as well as the amount you could win or lose. One type of trial was presented as being more risky (i.e., less chance of winning) and a second type of trial was presented as being less risky (i.e., more chance of winning).
For all “small” trials (those with small dollar amounts), the expected value (in the statistical sense) for gambling was identical (within 25 cents) to the amount that you were guaranteed to win or lose. That means, over the long run, if you chose the wheel every time, you’d expect to win/lose the same amount as you would if you chose the guaranteed option every time. The same was true for all “large” trials (those with large dollar amounts).
The independent variables in this experiment were (1) whether the trial gave you a guaranteed gain or loss, (2) whether the guaranteed amount was large or small, and (3) whether the odds on the wheel were more risky or less risky. The dependent variable is the proportion of times you selected the gamble option for each type of trial.
What do we predict participants will do? Why?
Past research has shown that people treat risk differently for choices involving gains than for choices involving losses. In particular, when the choices are gains, people tend to be risk-avoiding. That is, they prefer a sure gain to a risky (probabilistic) gain. On the other hand, people tend to be risk-seeking when the choices involve losses. That is, they prefer a risky loss (that might lead to no loss at all) than a sure loss of a certain amount.
How robust is this effect? Are there limits to this effect?
The effect is widely reported in the literature. However, past versions of CogLab have not replicated the finding. For example, with over 70,000 people contributing to the global data, there was no difference found between the gains and loss options. This version now tries to make the odds and gains/losses more obvious by using a “wheel of fortune” game.
Global Data:
Other Questions to Answer:
What was your final $ amount (how much money did you win – or lose)?
2. Describe your article search process by answering each question:
a. What search engine did you use?
b. What key terms did you use?
c. How did you refine your search to find the articles?
d. How did you find a free full-text pdf of the articles?
e. How did you determine that the applied article was a good and valid source?
3. What does your data pattern tell you about your decision making process? Do you take risks? Under what circumstances do you take risks?
4. Think of a real-world situation in which you had to make a risky decision where there was some gain or loss involved. What did you do? What influenced your decision?
5. Your company is worth $1,000,000, but you are facing losses over the next year. The
board of trustees has to decide which investment plan they will accept. You have two
choices for how you will present the options to the board of trustees, listed below:
Presentation A:
Investment Plan 1: We are guaranteed to lose $300,000.
Investment Plan 2: There’s a 33% chance that we will not lose any money, and a 67% chance that we will lose all of the money.
Presentation B:
Investment Plan 1: We are guaranteed to keep $700,000.
Investment Plan 2: There’s a 33% chance that we will keep $1,000,000, and a 67% chance
that we will not keep any of the money.
What investment plan do you think the board would pick in Presentation A? Why?
What investment plan do you think the board would pick in Presentation B? Why?