Choosing an Inferior Alternative

Authors: J. Edward Russo, Cornell University; Kurt A. Carlson, Duke University; Margaret G. Meloy, The Pennsylvania State University

Publication: Psychological Science

Year: 2006

Focus Area: Persuasion, Emotion, Decision Making

Relevance: People may become involved in scams that they would not rationally choose to participate in. The ways in which fraudsters present information to their victims may be important in explaining why people agree to scams that, when examined rationally, are not good choices.

Summary: This experiment shows that people can be manipulated to make irrational decisions simply by the order in which information about their options is presented. In this case, people were manipulated to choose a restaurant that they had previously rated as undesirable.

  • The first part of the experiment was a control test, in which participants chose between two restaurants that were presented evenly. Less than half (41%) of the subjects chose the inferior restaurant, as expected.
  • A second part of the experiment, conducted two weeks later with the same subjects, attempted to increase the number of people choosing the inferior restaurant by manipulating the order in which subjects learned information about the restaurant.
  • The share of the group that chose the inferior restaurant increased from 41% to 62% between the two sessions. Furthermore, the participants were equally confident of their decision in the second session as the first and were unaware that they had been manipulated at all.

Author Abstract: We show how decision makers can be induced to choose a personally inferior alternative, a strong violation of rational decision making. First, the inferior alternative is installed as the leading option by starting with information that supports this alternative. Then, the decision maker uses the natural process of distorting new information to support whichever alternative is leading. This leader-supporting distortion overcomes the inherent advantages of the superior alternative. The end result is a tendency to choose the self-identified inferior alternative. We trace the choice process to reveal the amount of distortion and its influence on preference. Self-reported awareness of distortion to support the inferior alternative is not related to the amount of distortion. The absence of valid awareness suggests that the manipulation that produces this preference violation is unlikely to be detected and that the distortion is unlikely to be corrected by the decision maker. As expected, given the lack of awareness, final confidence is just as high when the inferior alternative is chosen as when the superior one is. The discussion considers how to prevent an adversary from manipulating one’s decisions using this technique.

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All Negative Moods Are Not Equal: Motivational Influences of Anxiety and Sadness on Decision Making

Authors: Rajagopal Raghunathan, New York University; and Michel Tuan Pham, Columbia University

Publication: Organizational Behavior and Human Decision Processes

Year: 1999

Focus Area: Emotion, Decision Making

Relevance: Risk and reward expectations are essential components of fraud schemes, and the effect of emotion on victims’ decision can determine their vulnerability to particular types of scams as well as fraud in general. Techniques that allow people to sidestep their emotions when making decisions could be beneficial in prevention efforts.

Summary: Previous studies of the effect of emotion on decision making have been too simplistic, comparing only positive and negative emotions. This study looks into the effects of different kinds of negative emotions, namely anxiety and sadness, and finds that they have different influences on decision making.

  • Sad people were more interested in risky but potentially highly rewarding options, while anxious people preferred safe but lower yielding options.
  • The authors propose that it was not the risk that was appealing to sad people, but rather the high reward that influenced their choice.
  • The effect of negative emotions diminished when subjects were asked to make the same choices on behalf of another person, rather than for themselves.
  • The authors note that this did not address situations that have high or low potential losses, and suggest that decisions might differ in these scenarios.

Author Abstract: Affective states of the same valence may have distinct, yet predictable, influences on decision processes. Results from three experiments show that, in gambling decisions, as well as in job selection decisions, sad individuals are biased in favor of high-risk/high-reward options, whereas anxious individuals are biased in favor of low-risk/low-reward options. We argue that these biases occur because anxiety and sadness convey distinct types of information to the decision-maker and prime different goals. While anxiety primes an implicit goal of uncertainty reduction, sadness primes an implicit goal of reward replacement. We offer that these motivational influences operate through an active process of feeling monitoring, whereby anxious or sad individuals think about the options and ask themselves, “What would I feel better about . . .?”

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Impact of Risk Disclosures Through Direct-to-Consumer Advertising on Elderly Consumers’ Behavioral Intent

Authors: Prashant Tukaram Nikam, The Ohio State University
Year: 2003

Focus Area: Prevention, Consumer Behavior

Relevance: Communication about risk happens both in legitimate fraud prevention programs and in fraud pitches to victims. In this research about pharmaceutical advertisements, the type of risk warning (general vs. specific) was more important than the number of warnings. The type of warning also influenced whether people sought further information about the product – people who heard specific warnings were less likely to research the product further. Do these trends hold true for fraud prevention programs?

Summary: Direct-to-consumer advertising (DTCA) for prescription drugs encourages consumers to approach their doctors about the advertised product. The FDA requires that these advertisements present balanced information about the risks and benefits of the product, but in practice these regulations are bent or broken.

  • The type of risk warning is more important than the number of warnings. People who received generalized information about the risks of an advertised drug thought more positively about the drug than people who received information about specific risks – regardless of the number of risk warnings they received.
  • People who received information about specific risks were less likely to research further information about the drug than people who heard generalized warnings.
  • The participants, who were all over 60, were more likely to ask their pharmacist or doctor for information about a drug than to research it online or in publications.
  • There are public health risks associated with overly strong risk warnings; people at risk for a condition may not seek help for it and people may not take prescribed medicine as directed if they fear side effects. These public health risks should be balanced when creating appropriate direct-to-consumer advertisements.

Abstract (from the authors): The new FDA guidelines on Direct-to-Consumer Advertising (DTCA) of prescription drugs require the sponsor to present balanced benefit-risk information. However, data suggest frequent lack of compliance with these guidelines. Misinformation to consumers can have serious implications on health and safety. The study objective was to explore the impact of variations in risk disclosures through DTC print advertisements on consumer attitudes and behaviors. A 2 x 2 factorial design was implemented, where the risk statements in the advertisements varied in number and specificity. A convenience sample of 240 elderly (≥ 60 years) male and female participants was recruited. The participants were asked to read a print advertisement and then complete a questionnaire.

Participants exposed to specific risk statements were less likely to look for additional information (p<0.01) and adopt the advertised drug (p<0.01). Additionally, they held less favorable attitudes toward the advertised drug (p<0.01) as compared to those presented with general risk statements. The number of risk statements presented had no significant effect on attitudes or behaviors. However, a two-way interaction effect of number and specificity of risk statements on likelihood of adoption was observed. This interaction demonstrates that when participants were exposed to two risk statements, they did not significantly differ in adoption rates as a function of specificity. However, when exposed to four risk statements, specificity had a significant impact on adoption of the advertised drug, such that participants receiving four specific risk statements were less likely to adopt the advertised drug. These findings have significant implications health policy. Presentation of highly specific risk information can adversely affect healthcare seeking behavior. Thus, drug manufacturers should aim at providing fair balance of benefit-risk information to lay consumers without compromising public health. There is also a need to re-evaluate and develop explicit FDA guidelines on fair balance of risk information presented in DTCA. Furthermore, the current research indicates that highly specific drug risk information can heighten perceived risk, which may result in reduced compliance.

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How Can Decision Making Be Improved?

Authors: Katherine L. Milkman, University of Pennsylvania; Dolly Chugh, New York University; Max H. Bazerman, Harvard University

Publication: Perspectives on Psychological Science
Year: 2009

Focus Area: Decision making, Prevention

Relevance: While prevention efforts cannot ensure that people make the correct decision, strategies to improve the decision-making process are valuable assets in improving outcomes. When is intuition detrimental and when is it valuable to decision making? Of particular interest in fraud prevention are techniques to address biases that people do not want to admit or believe about themselves.

Summary: Bad decisions are expensive and people want to avoid them, but there has not been enough academic work on strategies to improve decision making.

  • Good decisions are those that the decision maker “would regard as the right choice regardless of whether she was evaluating her own decision or someone else’s.”
  • The authors propose a model of decision making that involves two systems; one, the intuitive, fast, emotional system and two, the deliberate, slow, logical reasoning system.
  • In cases when system one leads to biases that undermines good decision making, strategies to actively incorporate rational thinking can improve outcomes. Alternatively, decision-making situations can be altered to account for emotional biases – especially in situations where people do not want to admit or believe their own biases (i.e. racial bias).

Author Abstract: The optimal moment to address the question of how to improve human decision making has arrived. Thanks to 50 years of research by judgment and decision-making scholars, psychologists have developed a detailed picture of the ways in which human judgment is bounded. This article argues that the time has come to focus attention on the search for strategies that will improve bounded judgment because decision-making errors are costly and are growing more costly, decision makers are receptive, and academic insights are sure to follow from research on improvement. In addition to calling for research on improvement strategies, this article organizes the existing literature pertaining to improvement strategies and highlights promising directions for future research.

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Harnessing Our Inner Angels and Demons: What We Have Learned About Want/Should Conflicts and How That Knowledge Can Help Us Reduce Short-Sighted Decision Making

Authors: Katherine L. Milkman, Harvard University; Todd Rogers, Harvard University; Max H. Bazerman, Harvard University

Publication: HBS Working Paper # 5787

Year: 2007

Focus Area: Prevention, Decision Making

Relevance: Understanding the contextual factors that influence a person’s ability to successfully exercise willpower and good decision making may improve the efficacy of financial fraud prevention efforts.

Summary: This overview of the want/should literature focuses on the contextual factors that change whether people tend to choose what they want to do or what they think they should do. It also suggests lessons for individuals and policy makers.

  • Now or Later: When making choices that take effect in the future, people favor should over want, e.g. when people are making choices about what to do tomorrow they’re more likely to choose to save money, exercise, or watch edifying films than if they’re making choices about what to do today.
  • Multiple choices or One at a time: Direct comparison of two or more choices encourages people to weight them more rationally, activating the should self. But when evaluating different possibilities one at a time, individuals are more likely to favor the want option.
  • Other factors, briefly mentioned, include: “extreme cognitive load,” memorizing a seven digit as opposed to a two digit number increases likelihood of selecting a want option. “Isolated vs. series of similar future choices,” when people are told they’re making the first in a series of choices, they’re more likely to choose the want option.

Finally, the authors consider ways policy could create “conditions that will help each individual do what is in her own long-term best interest,” which often involves enabling the selection of should over want options. Mechanisms discussed include commitment devices — preventative measures to restrain the want self — e.g. piggy banks and “save more tomorrow” program, which let workers sign up to have half of future raises set aside in an investment savings account.

Author Abstract: Although observers of human behavior have long been aware that people regularly struggle with internal conflict when deciding whether to behave responsibly or indulge in impulsivity, psychologists and economists did not begin to empirically investigate this type of want/should conflict until recently. In this paper, we review and synthesize the latest research on want/should conflict, focusing our attention on the findings from an empirical literature on the topic that has blossomed over the last 15 years. We then turn to a discussion of how individuals and policy makers can use what has been learned about want/should conflict to help decision makers select far-sighted options.

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A Hot/Cool-System Analysis of Delay of Gratification: Dynamics of Willpower

Authors: Janet Metcalfe, Columbia University; Walter Mischel, Columbia University

Publication: Psychological Review

Year: 1999

Focus Area: Persuasion, Decision Making, Prevention, Emotion

Relevance: Willpower can be manipulated – both positively and negatively – when people make decisions. The hot-cold framework provides suggestions on the subtleties of willpower manipulation and suggests potential techniques and explanations to increase willpower.

Summary: How are people able to control their actions and feelings if their initial drive is “ruled by a pleasure principle, and largely indifferent to reason”? This paper describes a theoretical framework of hot and cool systems to explain the delay of gratification paradigm (and is limited in scope to this paradigm alone).

  • The ability of a child to sacrifice an immediate reward for a larger,  but delayed reward, has been shown to predict social and cognitive outcomes later in life, including SAT scores.
  • The authors propose that the “cool cognitive” system and the “hot emotional” system interact when willpower is used to overcome an immediate desire.
  • Control strategies include hiding the stimulus (desired object) or ignoring it, both of which decrease the intensity of the hot system. Alternatively, efforts to activate the cool system include distracting oneself, either with another object or internally.
  • Photographs of desired objects were far easier to resist than the object itself. Even telling oneself that a desired object (i.e. a piece of candy) is a photograph can increase the length of time one is able to resist.

Author Abstract: A 2-system framework is proposed for understanding the processes that enable – and undermine – self-control or “willpower” as exemplified in the delay of gratification paradigm. A cool, cognitive “know” system and a hot, emotional “go” system are postulated. The cool system is cognitive, emotionally neutral, contemplative, flexible, integrated, coherent, spatiotemporal, slow, episodic, and strategic. It is the seat of self-regulation and self-control. The hot system is the basis of emotionality, fears as well as passions – impulsive and reflexive – initially controlled by innate releasing stimuli (and, thus, literally under “stimulus control”); it is fundamental for emotional (classical) conditioning and undermines efforts at self-control. The balance between the hot and cool systems is determined by stress, developmental level, and the individual’s self-regulatory dynamics. The interactions between these systems allow explanation of findings on willpower from 3 decades of research.

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The Heat of the Moment: Modeling Interactions Between Affect and Deliberation

Authors: George Loewenstein, Carnegie Mellon University; Ted O’Donoghue, Cornell University


Year: 2007

Focus Area: Emotion, Decision Making

Relevance: Impulsive behavior, according to this paper, can be seen as the triumph of the affective (emotional) mind over the deliberative (rational) mind. This simplification extends to many decision scenarios, but there are subtle variations that influence some decisions. Furthermore, emotions should not be seen as entirely negative influences on decision making.

Summary: Throughout history, human behavior has been seen as a dual-process model: a struggle between opposing forces, whether passion and reason, id and ego, or emotion and cognition. This paper attempts to consolidate these theories into a model of behavior that is influenced by “deliberative processes” that are goal-oriented and “affective processes” that include both emotions and motivational drivers.

  • The deliberative and affective systems have their own objectives, are influenced by the environment, and combine to produce behavior. This model assumes that the affective system comes into play first, and is then moderated by the deliberative system, or willpower.
  • In decisions between options that have different time frames (intertemporal choice), “the affective system is primarily driven by short-term outcomes, whereas the deliberative system cares about both short-term and long-term outcomes.”
  • In risky decision making, the deliberative system weighs the value of the options presented, while the affective system can contribute to inaccurate assessments of probability and tendencies to avoid risk.
  • One application of this theory applies to situations in which people who have few financial resources use up their willpower in daily decisions, in which they are constantly pressured to keep costs down. This theory suggests that people in this situation may be more prone to impulsive behavior when making decisions about inexpensive things because they have used up their resources of willpower.

Author Abstract: Drawing on diverse lines of research in psychology, decision making, and neuroscience, we develop a model in which a person’s behavior is determined by an interaction between deliberative processes that assess options with a broad, goal-based perspective, and affective processes that encompass emotions and motivational drives. Our model provides a framework for understanding many departures from rationality discussed in the literature, and captures the familiar feeling of being “of two minds.” Most importantly, by focusing on factors that moderate the relative influence of the two processes, our model generates a variety of novel testable predictions. We apply our model to time preferences, risk preferences, and social preferences.

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Hot-Cold Empathy Gaps and Medical Decision Making

Authors: George Loewenstein, Carnegie Mellon University

Publication: Health Psychology

Year: 2005

Focus Area: Emotion, Decision Making

Relevance: Scam artists can elicit emotional responses in their victims. These “hot” affective states can lead people to make rash judgments about subjects that they would normally weigh carefully before deciding.

Summary: Anger, fear, hunger and cravings are examples of the range of “hot” affects that can influence decision making. People who are in a “hot” state have trouble imagining how they would behave if they were in a “cool” affective state, and vice versa. Furthermore, people in a given affective state cannot easily imagine the behavior of another person, who is in the opposite affective state.

  • People in “hot” states give more weight to their current desires, without acknowledging that their preferences may change when they “cool off” – and that a “cooler” affect would allow them to make better decisions for the long run.
  • On the other hand, people in “cold” states underestimate the potential of affect to sway their decision making in future situations, and do not take adequate action to avoid “hot” states.
  • These empathy gaps can be classified temporally. Prospective gaps occur when looking ahead to future decision making situations, while retrospective gaps occur when people inaccurately recall a decision that they made in the past. Interpersonal gaps occur when two people are in different affective states and cannot correctly predict or understand each other’s motivations.
  • Loewenstein applies these findings to the ethics of medical decision making, in which empathy gaps are common. Doctors and patients must span hot-cold empathy gaps to make appropriate decisions, but are often in different emotional states when making these decisions.

Author Abstract: Prior research has shown that people mispredict their own behavior and preferences across affective states. When people are in an affectively “cold” state, they fail to fully appreciate how “hot” states will affect their own preferences and behavior. When in hot states, they underestimate the influence of those states and, as a result, overestimate the stability of their current preferences. The same biases apply interpersonally; for example, people who are not affectively aroused underappreciate the impact of hot states on other people’s behavior. After reviewing research documenting such intrapersonal and interpersonal hot-cold empathy gaps, this article examines their consequences for medical, and specifically cancer-related, decision making, showing, for example, that hot-cold empathy gaps can lead healthy persons to expose themselves excessively to health risks and can cause health care providers to undertreat patients for pain.

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The Role of Affect in Decision Making

Authors: George Loewenstein, Carnegie Mellon University; Jennifer S. Lerner, Carnegie Mellon University

Publication: Handbook of Affective Science

Year: 2003

Focus Area: Decision Making, Emotion

Relevance: This textbook chapter on emotion’s involvement in decision making provides a comprehensive introduction to the study of decision making. A number of common terms in decision research are defined in this chapter, often with easily understood examples.

Summary: Traditional decision theory focused on cognitive decision making but largely ignored the importance of emotions in decision making until the late 1980s, but now “contemporary decision research is characterized by an intense focus on emotion.” Current theory identifies two kinds of emotions that influence decisions: expected emotions, which are expectations about future emotional consequences of a decision, and immediate emotions, which are emotions felt while making a decision.

  • Expected emotions can moderate decision making by influencing how people weigh probabilities, value potential rewards versus losses, and attempt to avoid disappointment or recrimination about the decision they are making. The effects of expected emotions are often strong when people make decisions about risk or decisions with delayed consequences.
  • Immediate emotions are determined by anticipation of a decision or factors unrelated to the decision at hand. Intense emotions have larger impacts on decisions and are more difficult to manipulate or suppress.
  • Historically, emotions have been seen as negative influences on decision making. Lately, however, more value has been awarded to emotions and “gut feelings” as legitimate tools in decision making – as long as they are used along with other decision making techniques.

Author Abstract: Our goal in this chapter is to highlight and organize these new emotion-related developments in decision research. We organize our review around a general theoretical framework for understanding the different ways in which emotions enter into decision making. Such a framework, we hope, can facilitate integration of the wide-ranging findings that have emerged from recent research and shed new light on several central topics in decision theory, such as how people deal with outcomes that are uncertain and how they discount delayed costs and benefits.

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Risk as Feelings

Authors: George F. Loewenstein, Carnegie Mellon University; Elke U. Weber, Columbia University; Christopher K. Hsee, University of Chicago; Ned Welch, Carnegie Mellon University

Publication: Psychological Bulletin

Year: 2001

Focus Area: Decision making, Emotion, Risk

Relevance: Financial decisions – including decisions to buy into a deal that turns out to be a fraud – often require an assessment of risk and reward. This paper explains one theory about the importance of emotion in weighing risky decisions.

Summary: Past research on decision making has been “consequentialist” – built upon the assumption that people make decisions based on their assessment of the consequences of the various options available to them. This approach to decision making accounts for anticipated emotions, or emotions that a person expects to experience in the future as a result of the decision, but does not incorporate anticipatory emotions, or the “immediate visceral reactions […] to risks and uncertainties.”

  • This paper proposes a risk-as-feelings hypothesis in which emotional responses like worry and anxiety, which develop in reaction to the decision making task itself, influence cognitive evaluations about the probability and desirability of potential outcomes.
  • These emotional responses can contradict cognitive, or rational, assessments of risk – making people more or less willing to make a particular risky decision than one might expect.
  • This article is focused on decisions about risk, but the authors suggest that the main points can be extended to other kinds of decisions.

Author Abstract: Virtually all current theories of choice under risk or uncertainty are cognitive and consequentialist. They assume that people assess the desirability and likelihood of possible outcomes of choice alternatives and integrate this information through some type of expectation-based calculus to arrive at a decision. The authors propose an alternative theoretical perspective, the risk-as-feelings hypothesis, that highlights the role of affect experienced at the moment of decision making. Drawing on research from clinical, physiological, and other subfields of psychology, they show that emotional reactions to risky situations often diverge from cognitive assessments of those risks. When such divergence occurs, emotional reactions often drive behavior. The risk-as-feelings hypothesis is shown to explain a wide range of phenomena that have resisted interpretation in cognitive-consequentialist terms.

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