Does uncertainty cause inertia in decision making? An experimental study of the role of regret aversion and indecisiveness

Previous research has shown that often there is clear inertia in individual decision making---that is, a tendency for decision makers to choose a status quo option. I conduct a laboratory experiment to investigate two potential determinants of inertia in uncertain environments: (i) regret aversion and (ii) ambiguity-driven indecisiveness. I use a between-subjects design with varying conditions to identify the effects of these two mechanisms on choice behavior. In each condition, participants choose between two simple real gambles, one of which is the status quo option. I find that inertia is quite large and that both mechanisms are equally important.

Risk, ambiguity, and diversification

Attitudes toward risk influence the decision to diversify among uncertain options. Yet, because in most situations the options are ambiguous, attitudes toward ambiguity may also play an important role. I conduct a laboratory experiment to investigate the effect of ambiguity on the decision to diversify. I find that diversification is more prevalent and more persistent under ambiguity than under risk. Moreover, excess diversification under ambiguity is driven by participants who stick with a status quo gamble when diversification among gambles is not feasible. This behavioral pattern cannot be accommodated by major theories of choice under ambiguity.

Complexidade, excesso de opções e paralisia decisória : evidências para a indústria de investimentos brasileira

Esta dissertação busca investigar a hipótese de sobrecarga de opções, denominada em inglês como choice overload, associada ao aumento de complexidade e da quantidade de informações disponíveis, ou information overload, abordada e discutida por pesquisadores como O’Donoghue e Rabin (1998), Iyengar e Lepper (2000), Schwartz (2002), Iyengar, Jiang e Huberman (2003) e Gourville e Soman (2005). Neste trabalho, a investigação será no contexto da indústria de produtos de investimento brasileira. Para isso, através de uma pesquisa empírica, simulamos a decisão de um investidor comum diante de diferentes cenários propostos, com menos ou mais opções e menos ou mais informações. Em linha com as pesquisas citadas, evidências mostraram a importância de se considerar e avaliar esses efeitos, ainda que hipóteses previamente estabelecidas não tenham sido confirmadas e experimentos mais amplos precisem ser realizados. Neste estudo, quando a oferta se resume a apenas um fundo de investimento, mesmo que claramente melhor do que o cenário inicial, um alto índice de 32% ainda decide procrastinar a decisão, ou seja, apresentar apenas uma opção, o extremo oposto de choice overload, não se apresentou como uma solução eficaz. Também foram propostos outros dois cenários, ambos quase idênticos, com cinco alternativas de fundos de investimento e informações de retorno esperado e risco para cada um deles. No entanto, um desses dois cenários disponibilizava hyperlinks direcionando para lâminas com informações adicionais para cada fundo de investimento. Mesmo com a opção de ignorá-las, a sua apresentação fez com que o índice de procrastinação aumentasse de 16% para 28%, resultado diretamente relacionado a regret aversion. Estudos anteriores mostram que há altas chances de que essa procrastinação se perpetue.

Optimal irrigation depth for bean crops considering water constraints and farmer`s risk aversion level

Nowadays, the rising competition for the use of water and environmental resources with consequent restrictions for farmers should change the paradigm in terms of irrigation concepts, or rather, in order to attain economical efficiency other than to supply water requirement for the crop. Therefore, taking into account the social and economical role of bean activity in Brazil, as well as the risk inherent to crop due to its high sensibility to both deficit and excessive water, the optimization methods regarding to irrigation management have become more interesting and essential. This study intends to present a way to determine the optimal water supply, considering different combinations between desired bean yield and level of risk, bringing as a result a graph with the former associated with the latter, depending on different water depths.

Overshadowing in conditioned taste aversion or in conditioned emotional response after neonatal ventral hippocampal lesions in rats

The neonatal hippocampus lesion thought to model schizophrenia should show the same modifications in behavioural tests as other models, especially pharmacological models. namely decreased latent inhibition, blocking and overshadowing. The present study is set out to evaluate overshadowing in order to complement our previous studies, which had tested latent inhibition. ""Overshadowing"" refers to the decreased conditioning that occurs when the to-be-conditioned stimulus is combined with another stimulus at the conditioning stage. We used the same two Pavlovian conditioning paradigms as in our previous works, namely conditioned taste aversion (CTA) and conditioned emotional response (CER). A sweet taste overshadowed a salty conditioned stimulus, and a tone overshadowed a flashing light. Totally different stimuli were used to counter possible sensory biases. The protocols were validated with two groups of Sprague Dawley rats. The same two protocols were then applied to a cohort of rats whose ventral hippocampus had been destroyed when they were 7 days old. Only rats with extended ventral hippocampus lesions were included. The overall effect of Pavlovian conditioning was attenuated, significantly so in the conditioned emotional response paradigm, but overshadowing appeared not to be modified in either the conditioned emotional response or the conditioned taste aversion paradigm. (C) 2008 Elsevier B.V. All rights reserved.

Food aversion: A critical balance between allergen-specific IgE levels and taste preference

Animals sensitized to allergens change their feeding behavior and avoid drinking the otherwise preferred sweetened solutions containing the allergens. This phenomenon, known as food aversion, appears to be mediated by allergen-specific IgE antibodies. Here we investigated food aversion in BALB/c and C57BL/6 mice, which differ in their allergic responses to the allergen ovalbumin as well as in their preference for sweet taste. BALB/c mice present higher levels of IgE and a natural lower preference for sweet flavors when compared to C57BL/6 mice. Specifically, we studied a conflicting situation in which animals simultaneously experienced the aversive contact with the allergen and the attractive sweet taste of increasing concentrations of sucrose. We found that BALB/c mice were more prone to develop food aversion than C57BL/6 mice and that this aversive behavior could be abolished in both strains by increasing the palatability of the solution containing the allergen. In both strains food aversion was positively correlated with the levels of allergen-specific IgE antibodies and inversely correlated with their preference for sucrose sweetened solutions. (C) 2009 Elsevier Inc. All rights reserved.

Pharmacological Manipulation of Immune-Induced Food Aversion in Rats

Background: Mice allergic to ovalbumin (OVA) avoid drinking a solution containing this antigen. This was interpreted as related to IgE-dependent mast cell degranulation and sensory C fiber activation. Methods: We employed pharmacological manipulation to further investigate the mediators involved in immune-induced food aversion. Results: While nonimmunized rats preferred a sweetened OVA solution, immunized rats avoided it. We also employed a paradigm in which rats are conditioned to drink water for two 10-min sessions a day. Tolerant rats presented lower IgE titers, and this manipulation abrogated food aversion. Dexamethasone (1.0 mg/kg) prevented the aversion of OVA-immunized rats to the antigen-containing solution. Combined blockade of H(1) and 5-hydroxytryptamine (5-HT)(2) receptors by promethazine (3.0 mg/kg) plus methysergide (5.0 mg/kg) was unable to alter food aversion. Blockade of 5-HT(3) receptors by ondansetron (1.0 mg/kg) caused a twofold increase in the ingestion of the sweetened OVA solution by immunized rats, suggesting the involvement of 5-HT(3) receptors in food aversion. Finally, we showed that dexamethasone or promethazine plus methysergide, but not ondansetron, effectively prevented the IgE-dependent mast-cell-degranulation-induced increase in vascular permeability in rats. Conclusion: We suggest that regardless of whether or not they cause edema, IgE-mediated mast cell degranulation and consequent 5-HT(3) signaling are involved in the process that triggers avoidance to the source of the allergen in allergic rats. Copyright (C) 2008 S. Karger AG, Basel

Risk Aversion in a Mixed-Integer Nonlinear Approach to Support Decision-Making for a Hydro Power Producer

In this paper, a mixed-integer nonlinear approach is proposed to support decision-making for a hydro power producer, considering a head-dependent hydro chain. The aim is to maximize the profit of the hydro power producer from selling energy into the electric market. As a new contribution to earlier studies, a risk aversion criterion is taken into account, as well as head-dependency. The volatility of the expected profit is limited through the conditional value-at-risk (CVaR). The proposed approach has been applied successfully to solve a case study based on one of the main Portuguese cascaded hydro systems.

Scheduling of a hydro producer considering head-dependency, price scenarios and risk-aversion

In this paper, a mixed-integer quadratic programming approach is proposed for the short-term hydro scheduling problem, considering head-dependency, discontinuous operating regions and discharge ramping constraints. As new contributions to earlier studies, market uncertainty is introduced in the model via price scenarios, and risk aversion is also incorporated by limiting the volatility of the expected profit through the conditional value-at-risk. Our approach has been applied successfully to solve a case Study based on one of the main Portuguese cascaded hydro systems, requiring a negligible computational time.

Reciprocity, inequity aversion, and oligopolistic competition

This paper studies how reciprocity and inequity aversion influence the behavior of firms in imperfectly competitive markets. The paper shows that if reciprocal firms compete à la Cournot, then they are able to sustain “collusive” outcomes under a positive reciprocity equilibrium. By contrast, Stackelberg warfare outcomes may emerge under a negative reciprocity equilibrium. The results for inequity aversion are similar. Cournot competition between inequity averse firms can be harmful to consumers if it leads to equilibria where firms feel compassion toward each other. However, in equilibria where inequity averse firms are envious of each other consumers are better off than if firms were selfish. The paper also shows that only under very restrictive conditions does reciprocity or inequity aversion have an impact on Bertrand competition. Finally, the paper shows that non-selfish preferences have a greater impact on equilibrium outcomes in markets with a small number of firms.

Regret associated with past and future messes under a maximizing mind-set

Promotions can make you happy if you get the “best” deal or miserable if you miss it. Previous research on this topic has shown that people favor products associated with a past miss to products associated with a future miss, and people in a maximizing mind-set, i.e. people who search for the best in different domains, feel more regret in a consumption domain. This research confirms that consumers prefer purchasing a product associated with a past miss (Experiments 1 and 2) and that regret levels are higher when participants come across the future miss, under the maximizing mind-set (Experiment 2). These studies add to the notion that information on regret might prompt people to make decisions towards a more optimistic outcome.

Choosing between past and future regret

Sometimes decisions imply trade-offs that force people to accept missing an opportunity in the past or in the future. It has not yet been clarified whether a past miss or a future miss elicits more regret. In a direct comparison, Shani, Danziger, and Zeelenberg found support for the greater impact of future misses. In an experimental design with 216 students, we replicated their study and tested the strength of the future miss in a separate evaluation and with different periods. The results show that future misses cause less regret than past misses do when evaluated separately. However, future misses made participants change their feelings of regret more than past misses did. Feelings of regret did not decrease when future misses were further away. Our findings support the strength of future misses on regret but also show contrasting effects when evaluated separately. This indicates the further need for research in this topic.

Stress induced risk-aversion is reverted by D2/D3 agonist in the rat

Stress exposure triggers cognitive and behavioral impairments that influence decision-making processes. Decisions under a context of uncertainty require complex reward-prediction processes that are known to be mediated by the mesocorticolimbic dopamine (DA) system in brain areas sensitive to the deleterious effects of chronic stress, in particular the orbitofrontal cortex (OFC). Using a decision-making task, we show that chronic stress biases risk-based decision-making to safer behaviors. This decision-making pattern is associated with an increased activation of the lateral part of the OFC and with morphological changes in pyramidal neurons specifically recruited by this task. Additionally, stress exposure induces a hypodopaminergic status accompanied by increased mRNA levels of the dopamine receptor type 2 (Drd2) in the OFC; importantly, treatment with a D2/D3 agonist quinpirole reverts the shift to safer behaviors induced by stress on risky decision-making. These results suggest that the brain mechanisms related to risk-based decision-making are altered after chronic stress, but can be modulated by manipulation of dopaminergic transmission.