Time Is Money: The Effect of Mode-of-Thought on Financial Decision-Making.

The dual-system approach holds that deliberative decisions and in-depth evaluation processes lead people to better financial decisions. However, research identifies situations where optimal economic decisions may stem from a more intuitive decision process. In the current work, we present three experimental studies that examined how these two modes-of-thought affect financial decisions. In Study 1, deliberative processes were indeed associated with better one-shot descriptive-based financial decisions. However, Study 2 showed that when participants were asked to make repeated decisions and were required to learn from their experience, the advantage of deliberative over intuitive processes was eliminated. In addition, when participants employed intuitive processes, the quality of their financial decisions improved significantly with experience. Finally, Study 3 showed that the deliberative processing style may lose its advantage when information is not fully available. Overall, these findings suggest that deliberation may contribute to financial decision-making in one-shot decisions. However, when information is lacking, and decisions are repetitive, intuitive processes might be just as good.

And sympathy is what we need my friend-Polite requests improve negotiation results.

The wording negotiators use shapes the emotions of their counterparts. These emotions, in turn, influence their counterparts' economic decisions. Building on this rationale, we examined how the language used during negotiation affects discount rate and willingness to engage in future deals. In three studies, participants assumed the role of retailers. Alleged counterparts (actually a computerized program) asked for a discount under three conditions: request, want, and demand. Results show that less extreme language (request/want) resulted in better outcomes than demanding a discount. Moreover, while the language used by the customer had an effect on experienced emotions, the positive emotions (sympathy and empathy) participants felt toward the customer mediated the relationship between the linguistic cue and the negotiation outcome. Our results inform both psycholinguistic research and negotiation research by demonstrating the causal role of linguistic cues in activating concept-knowledge relevant to different emotional experiences, and point to the down-the-line impact on shaping negotiation preferences.

Are we attracted by losses? Boundary conditions for the approach and avoidance effects of losses.

The majority of the literature on the psychology of gains and losses suggests that losses lead to an avoidance response. Several studies, however, have shown that losses can also lead to an approach response, whereby an option is selected more often when it produces losses. In five studies we examine the boundary conditions for these contradictory approach and avoidance effects. The results show that an approach response emerges only when losses are produced by a highly advantageous choice alternative and when participants have ample unbiased direct or vicarious experience with this alternative. Additionally, the avoidance response to losses is also not ubiquitous and emerges when alternatives producing losses are experienced as disadvantageous. Thus, the findings suggest that both the approach and avoidance effects of losses exist and can be accounted for by increased investment of cognitive resources with losses (i.e., loss attention). Additionally, the findings clarify the loss attention account in indicating that losses increase exploitative behavior based on experienced outcomes, a process which can be locally optimal. (PsycINFO Database Record (c) 2019 APA, all rights reserved).

Past Actions as Self-Signals: How Acting in a Self-Interested Way Influences Environmental Decision Making.

In the last few decades, awareness of environmental issues has increased significantly. Little has changed, however, in human activities contributing to environmental damage. Why is it so difficult for us to change our behavior in a domain that is clearly so important to the future of humanity? Here we propose and test the possibility that self-signaling, the way we view ourselves based on our past behaviors, is one of the factors contributing to the difficulty of taking environmental action. In three experiments, we show that previous self-interested thoughts or behaviors serve as important signals that hinder the likelihood of acting in line with an individual's reported concern for the environment. This study not only helps explain the gap between environmental awareness and action, but also suggests alternative strategies for policymakers and environmental agencies to promote proenvironmental behavior.

Determinants of judgment and decision making quality: the interplay between information processing style and situational factors.

A framework is presented to better characterize the role of individual differences in information processing style and their interplay with contextual factors in determining decision making quality. In Experiment 1, we show that individual differences in information processing style are flexible and can be modified by situational factors. Specifically, a situational manipulation that induced an analytical mode of thought improved decision quality. In Experiment 2, we show that this improvement in decision quality is highly contingent on the compatibility between the dominant thinking mode and the nature of the task. That is, encouraging an intuitive mode of thought led to better performance on an intuitive task but hampered performance on an analytical task. The reverse pattern was obtained when an analytical mode of thought was encouraged. We discuss the implications of these results for the assessment of decision making competence, and suggest practical directions to help individuals better adjust their information processing style to the situation at hand and make optimal decisions.

Fairness requires deliberation: the primacy of economic over social considerations.

While both economic and social considerations of fairness and equity play an important role in financial decision-making, it is not clear which of these two motives is more primal and immediate and which one is secondary and slow. Here we used variants of the ultimatum game to examine this question. Experiment 1 shows that acceptance rate of unfair offers increases when participants are asked to base their choice on their gut-feelings, as compared to when they thoroughly consider the available information. In line with these results, Experiments 2 and 3 provide process evidence that individuals prefer to first examine economic information about their own utility rather than social information about equity and fairness, even at the price of foregoing such social information. Our results suggest that people are more economically rational at the core, but social considerations (e.g., inequality aversion) require deliberation, which under certain conditions override their self-interested impulses.

Losses as ecological guides: minor losses lead to maximization and not to avoidance.

Losses are commonly thought to result in a neuropsychological avoidance response. We suggest that losses also provide ecological guidance by increasing focus on the task at hand, and that this effect may override the avoidance response. This prediction was tested in a series of studies. In Study 1a we found that minor losses did not lead to an avoidance response. Instead, they guided participants to make advantageous choices (in terms of expected value) and to avoid disadvantageous choices. Moreover, losses were associated with less switching between options after the first block of exploration. In Study 1b we found that this effect was not simply a by-product of the increase in visual contrast with losses. In Study 1c we found that the effect of losses did not emerge when alternatives did not differ in their expected value but only in their risk level. In Study 2 we investigated the autonomic arousal dynamics associated with this behavioral pattern via pupillometric responses. The results showed increased pupil diameter following losses compared to gains. However, this increase was not associated with a tendency to avoid losses, but rather with a tendency to select more advantageously. These findings suggest that attention and reasoning processes induced by losses can out-weigh the influence of affective processes leading to avoidance.

Loss attention in a dual-task setting.

The positive effect of losses on performance has been explained as stemming from the increased weighting of losses relative to gains. We examine an alternative possibility whereby this effect is mediated by attentional processes. Using the dual-task paradigm, we expected that positive effects of losses on performance would emerge under attentional scarcity and diffuse to a concurrently presented task. In Study 1, decision performance was compared for a task that involved either gains or losses and was performed either alone or as a secondary task. The results showed a significant 40% improvement in performance in the loss condition, but only under conditions of resource scarcity, when the task was a secondary one. In Study 2, the same task was presented as a primary task. Again, losses were associated with improved performance in the secondary task. Given that this secondary task did not include losses, these findings demonstrate an attentional spillover effect.

The partial-reinforcement extinction effect and the contingent-sampling hypothesis.

The partial-reinforcement extinction effect (PREE) implies that learning under partial reinforcements is more robust than learning under full reinforcements. While the advantages of partial reinforcements have been well-documented in laboratory studies, field research has failed to support this prediction. In the present study, we aimed to clarify this pattern. Experiment 1 showed that partial reinforcements increase the tendency to select the promoted option during extinction; however, this effect is much smaller than the negative effect of partial reinforcements on the tendency to select the promoted option during the training phase. Experiment 2 demonstrated that the overall effect of partial reinforcements varies inversely with the attractiveness of the alternative to the promoted behavior: The overall effect is negative when the alternative is relatively attractive, and positive when the alternative is relatively unattractive. These results can be captured with a contingent-sampling model assuming that people select options that provided the best payoff in similar past experiences. The best fit was obtained under the assumption that similarity is defined by the sequence of the last four outcomes.

Loss-aversion or loss-attention: the impact of losses on cognitive performance.

Losses were found to improve cognitive performance, and this has been commonly explained by increased weighting of losses compared to gains (i.e., loss aversion). We examine whether effects of losses on performance could be modulated by two alternative processes: an attentional effect leading to increased sensitivity to task incentives; and a contrast-related effect. Empirical data from five studies show that losses improve performance even when the enhanced performance runs counter to the predictions of loss aversion. In Study 1-3 we show that in various settings, when an advantageous option produces large gains and small losses, participants select this alternative at a higher rate than when it does not produce losses. Consistent with the joint influence of attention and contrast-related processes, this effect is smaller when a disadvantageous alternative produces the losses. In Studies 4 and 5 we find a positive effect on performance even with no contrast effects (when a similar loss is added to all alternatives). These findings indicate that both attention and contrast-based processes are implicated in the effect of losses on performance, and that a positive effect of losses on performance is not tantamount to loss aversion.

Losses as modulators of attention: review and analysis of the unique effects of losses over gains.

It has been shown that in certain situations losses exert a stronger effect on behavior than respective gains, and this has been commonly explained by the argument that losses are given more weight in people's decisions than respective gains. However, although much is understood about the effect of losses on cognitive processes and behavior, 2 major inconsistencies remain. First, recent empirical evidence fails to demonstrate that people avoid incentive structures that carry equivalent gains and losses. Second, findings in experience-based decision tasks indicate that following losses, increased arousal is observed simultaneously with no behavioral loss aversion. To account for these findings, we developed an attention-allocation model as a comprehensive framework for the effect of losses. According to this model losses increase on-task attention, thereby enhancing the sensitivity to the reinforcement structure. In the current article we examine whether this model can account for a broad range of empirical phenomena involving losses. We show that as predicted by the attentional model, asymmetric effects of losses on behavior emerge where gains and losses are presented separately but not concurrently. Yet, even in the absence of loss aversion, losses have distinct effects on performance, arousal, frontal cortical activation, and behavioral consistency. The attentional model of losses thus explains some of the main inconsistencies in previous studies of the effect of losses.

Processing Differences between Descriptions and Experience: A Comparative Analysis Using Eye-Tracking and Physiological Measures.

Do decisions from description and from experience trigger different cognitive processes? We investigated this general question using cognitive modeling, eye-tracking, and physiological arousal measures. Three novel findings indeed suggest qualitatively different processes between the two types of decisions. First, comparative modeling indicates that evidence-accumulation models assuming averaging of all fixation-sampled outcomes predict choices best in decisions from experience, whereas Cumulative Prospect Theory predicts choices best in decisions from descriptions. Second, arousal decreased with increasing difference in expected value between gambles in description-based choices but not in experience. Third, the relation between attention and subjective weights given to outcomes was stronger for experience-based than for description-based tasks. Overall, our results indicate that processes in experience-based risky choice can be captured by sampling-and-averaging evidence-accumulation model. This model cannot be generalized to description-based decisions, in which more complex mechanisms are involved.

The interplay of experience-based affective and probabilistic cues in decision making: arousal increases when experience and additional cues conflict.

In a study using behavioral and physiological measures we induced experience-based affective cues (i.e., differential anticipatory arousal) toward a risky and a safe option by letting participants repeatedly select between two decks of cards with feedback. In later test decisions we presented choice tasks between these trained and new pairs of decks. In some of the trials a low-valid probabilistic cue was provided after stimulus onset but before the decision. Although we were successful in inducing experience-based affective cues these did not influence participants' choices. In decisions without any further cues available people choose the safe and the risky option about equally often. If an additional low-valid probabilistic cue was available people followed this cue. Although experience had no effect on choices it influenced arousal. Anticipatory physiological arousal increased if the probabilistic cue and experience were conflicting. Our results are in line with recent findings indicating diminished loss aversion in experience-based decision making. They are also consistent with parallel constraint satisfaction models and shed light on the interrelation between experience, probabilistic cues, and arousal in decision making.

Recency gets larger as lesions move from anterior to posterior locations within the ventromedial prefrontal cortex.

In the past two decades neuroimaging research has substantiated the important role of the prefrontal cortex (PFC) in decision-making. In the current study, we use the complementary lesion based approach to deepen our knowledge concerning the specific cognitive mechanisms modulated by prefrontal activity. Specifically, we assessed the brain substrates implicated in two decision making dimensions in a sample of prefrontal cortex patients: (a) the tendency to differently weigh recent compared to past experience; and (b) the tendency to differently weigh gains compared to losses. The participants performed the Iowa Gambling Task, a complex experience-based decision-making task, which was analyzed with a formal cognitive model (the Expectancy-Valance model). The results indicated that decisions become influenced by more recent, as opposed to older, events when the damage reaches the posterior sectors of the ventromedial prefrontal cortex (VMPC). Furthermore, the degree of this recency deficit was related to the size of the lesion. These results suggest that the posterior area of the prefrontal cortex directly modulates the capacity to use time-delayed information. In contrast, we did not find similar modulation for the sensitivity to gains versus losses.