Take a Chance
Personal relative deprivation, delay discounting, and gambling
Mitchell Callan, Will Shead & James Olson
Journal of Personality and Social Psychology, forthcoming
Abstract:
Several lines of research have provided evidence for a relation between personal relative deprivation and gambling. Despite this knowledge, little is known about possible psychological mechanisms through which personal relative deprivation exerts its influence on gambling. The authors of this research sought to examine one such mechanism: the desire for immediate rewards. Using complementary approaches to studying psychological mechanisms, they tested in four studies the general hypothesis that personal relative deprivation translates into gambling urges and behavior in part via increased desires for immediate, even if smaller, rewards. Study 1 showed that an experimental manipulation of personal relative deprivation increased participants' preferences for smaller-sooner over larger-later rewards during a delay-discounting task. Studies 2 and 3 showed that a decreased willingness to delay gratification led to increased gambling behavior. Study 4 showed that preferences for smaller-sooner over larger-later rewards statistically mediated the relation between self-reported personal relative deprivation and gambling urges among a community sample of gamblers. The implications and potential applications of these findings are discussed.
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Jean-Pierre Benoît & Juan Dubra
Econometrica, September 2011, Pages 1591-1625
Abstract:
It is common for a majority of people to rank themselves as better than average on simple tasks and worse than average on difficult tasks. The literature takes for granted that this apparent misconfidence is problematic. We argue, however, that this behavior is consistent with purely rational Bayesian updaters. In fact, better-than-average data alone cannot be used to show overconfidence; we indicate which type of data can be used. Our theory is consistent with empirical patterns found in the literature.
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When opportunity knocks: The effect of a perceived unique opportunity on compliance
Jerry Burger & David Caldwell
Group Processes & Intergroup Relations, September 2011, Pages 671-680
Abstract:
Four studies examined the effect of a perceived unique opportunity on compliance. In all four studies, participants who believed they had an opportunity available to few others were more likely to agree with a request than participants who believed the opportunity was widely available or participants who received no opportunity information. We attribute the effect to a widely held heuristic that one should take advantage of unique opportunities. Study results demonstrated that people respond to a perceived unique opportunity even when supplies are not limited and when the opportunity is the result of pure chance. The results of a mediation analysis supported the interpretation that the perceived uniqueness of the opportunity underlies the effect.
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Gain and Loss Learning Differentially Contribute to Life Financial Outcomes
Brian Knutson, Gregory Samanez-Larkin & Camelia Kuhnen
PLoS ONE, September 2011, e24390
Abstract:
Emerging findings imply that distinct neurobehavioral systems process gains and losses. This study investigated whether individual differences in gain learning and loss learning might contribute to different life financial outcomes (i.e., assets versus debt). In a community sample of healthy adults (n = 75), rapid learners had smaller debt-to-asset ratios overall. More specific analyses, however, revealed that those who learned rapidly about gains had more assets, while those who learned rapidly about losses had less debt. These distinct associations remained strong even after controlling for potential cognitive (e.g., intelligence, memory, and risk preferences) and socioeconomic (e.g., age, sex, ethnicity, income, education) confounds. Self-reported measures of assets and debt were additionally validated with credit report data in a subset of subjects. These findings support the notion that different gain and loss learning systems may exert a cumulative influence on distinct life financial outcomes.
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Team history and choking under pressure in major soccer penalty shootouts
Geir Jordet, Esther Hartman & Pieter Jelle Vuijk
British Journal of Psychology, forthcoming
Abstract:
This study examined the links between historical team results and individual players' subsequent performances in a high-pressure real-world sport situation. Videos were obtained from all soccer penalty shootouts held in two major international tournaments (World Cup and European Championships) between 1976 and 2006 (n = 260 players/309 kicks), and we controlled for team ability and country. The results showed that players on teams with preceding losses performed worse and generally took their shots more quickly than players on teams with preceding wins. These differences were also found with players who took no personal part in the preceding games. In conclusion, the results support the existence of historical dependency effects for performance on important and dramatic high-pressure tasks and they are in part consistent with a view of choking under pressure as a function of threatened egotism and self-regulation failure.
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Do Market Returns Influence Risk Tolerance? Evidence from Panel Data
Rui Yao & Angela Curl
Journal of Family and Economic Issues, September 2011, Pages 532-544
Abstract:
This study used the 1992-2006 waves of the Health and Retirement Study (HRS) to investigate changes in risk tolerance levels over time in response to stock market returns. Findings indicate that risk tolerance tends to increase when market returns increase and decrease when market returns decrease. Individuals who change their risk tolerance in this manner are likely to invest in stocks when prices are high and sell when prices are low. Researchers, employers, financial educators and practitioners should help investors overcome the bias of overweighting recent news of market performance.
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When distance pays off: The role of construal level in spending predictions
Johanna Peetz & Roger Buehler
Journal of Experimental Social Psychology, forthcoming
Abstract:
Self predictions are often optimistically biased, even for recurrent events. People could generate more realistic predictions by using information about past experiences, however they tend to disregard this cognitive approach. Drawing on Construal Level Theory, we propose that increases in construal level facilitate the use of information from past experience, and thereby increase prediction accuracy. This proposal was tested in two studies examining predictions of personal spending. Consistent with the hypotheses, individuals induced to construe the prediction target at a higher level of abstraction generated more accurate predictions (Study 1) and the effect of increased construal level on prediction was attributable to a greater reliance on past experience (Studies 1 and 2). The findings indicate that high-level construal can sometimes benefit prediction accuracy.
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Regret, Disappointment and the Endowment Effect
Luis Martinez, Marcel Zeelenberg & John Rijsman
Journal of Economic Psychology, forthcoming
Abstract:
The endowment effect is the finding that minimum selling prices for a particular good exceed maximum buying prices. We build on and extend previous research showing that emotions influence the endowment effect, and reveal that the two negatively valenced decision-related emotions, regret and disappointment, have distinct effects on the valuation of an object. We found that an induction of regret eliminates the classic endowment effect, whereas an induction of disappointment reverses it. The findings demonstrate the necessity of a specific emotion approach to understand the effects on decision making.
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Lisa Lole et al.
Psychophysiology, forthcoming
Abstract:
Differential patterns of physiological arousal to win and loss events during gambling is central to psychological conceptualizations of gambling behaviors but is poorly researched. We recorded heart rate (HR) and skin conductance responses (SCRs) to wins and losses while 23 healthy participants played for small incentives on a simulated electronic gambling task. Wins produced large SCRs whereas losses did not, and large wins produced larger SCRs than small wins. Electrodermal measures also correlated with reward responsiveness on a personality measure and with ratings of excitement during gambling. HR evidenced a slight deceleration before event outcomes, and the rebound HR was larger after wins than after losses. The study demonstrates that physiological changes to gambling events can be reliably captured, and that these changes are sensitive to differential outcomes. These findings establish a foundation for future research in field settings.
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Yoon-Mi Hur et al.
Personality and Individual Differences, forthcoming
Abstract:
Despite numerous folk sayings about miserly people, the genetic and environmental architecture of the character trait of miserliness has been very rarely studied to date. We administered six items of the miserliness scale to 1110 pairs of South Korean twins aged 12- to 25-years (M = 18.0, SD = 3.3). Model-fitting analyses indicated that 28% (95% CI: 21-34%) and 72% (95% CI: 66-79%) of individual difference in miserliness were attributable to genetic and unique environmental influences, respectively. Common family environmental effects were negligible, consistent with a large body of behavioral genetic literature on personality. Sex differences in the magnitude of genetic and environmental factors in miserliness were not significant.
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The Relevance of Thinking-by-Analogy for Investors' Willingness-to-Pay: An Experimental Study
Hammad Siddiqi
Journal of Economic Psychology, forthcoming
Abstract:
People tend to think by analogies. We investigate whether thinking-by-analogy matters for investors' willingness to pay for a risky asset in a laboratory experiment. We find that thinking-by-analogy has a strong influence when the assets in question have similar (but not identical) payoffs. The hypothesis of thinking-by-analogy or coarse thinking clearly outperforms other hypotheses including the hypothesis of arbitrage-free or rational pricing. When the similarity between the payoffs is reduced, the risk neutral hypothesis outperforms the hypothesis of thinking-by-analogy. Regardless of the similarity between the payoffs, the arbitrage-free or rational pricing remains the hypothesis with the worst performance.
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The today and tomorrow of kids: Time preferences and educational outcomes of children
Marco Castillo et al.
Journal of Public Economics, forthcoming
Abstract:
We experimentally investigate the distribution of children's time preferences along gender and racial lines. We find that boys are more impatient than girls and black children are more impatient than white children. Black boys have the highest discount rates of all groups. Most importantly, we show that impatience has a direct correlation with behavior that is predictive of economic success. An increase of one standard deviation in the discount rate is associated with an increase in the number of disciplinary referrals that a child has the following school year by 14%. Our results suggest that impatience might play an important role in determining the success of performance incentive programs for school children.
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Behavioral and neural correlates of delay of gratification 40 years later
B.J. Casey et al.
Proceedings of the National Academy of Sciences, 6 September 2011, Pages 14998-15003
Abstract:
We examined the neural basis of self-regulation in individuals from a cohort of preschoolers who performed the delay-of-gratification task 4 decades ago. Nearly 60 individuals, now in their mid-forties, were tested on "hot" and "cool" versions of a go/nogo task to assess whether delay of gratification in childhood predicts impulse control abilities and sensitivity to alluring cues (happy faces). Individuals who were less able to delay gratification in preschool and consistently showed low self-control abilities in their twenties and thirties performed more poorly than did high delayers when having to suppress a response to a happy face but not to a neutral or fearful face. This finding suggests that sensitivity to environmental hot cues plays a significant role in individuals' ability to suppress actions toward such stimuli. A subset of these participants (n = 26) underwent functional imaging for the first time to test for biased recruitment of frontostriatal circuitry when required to suppress responses to alluring cues. Whereas the prefrontal cortex differentiated between nogo and go trials to a greater extent in high delayers, the ventral striatum showed exaggerated recruitment in low delayers. Thus, resistance to temptation as measured originally by the delay-of-gratification task is a relatively stable individual difference that predicts reliable biases in frontostriatal circuitries that integrate motivational and control processes.
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Memory for future gambling wins
Alan Scoboria & Tobi Wilson
Psychology of Addictive Behaviors, September 2011, Pages 565-572
Abstract:
Analogous to false memories for the past, gambling behavior may be influenced by the development of vivid, believed false "memories" for future gambling outcomes. We examined the degree to which believed memory-like representations for future gambling wins and losses were associated with prior substantial win experiences, frequency of gambling, risk for problem gambling, and other types of gambling expectancies. Regular gamblers with and without prior substantial wins rated the strength of a specific outcome expectancy, their belief that substantial gambling wins and losses would occur in the future, and rated the strength of "memory" for future gambling wins and losses. They then described a future win and a future loss and rated memory-like phenomenal characteristics for these events. Prior winners rated future wins as more believable relative to future losses, and rated future gambling outcomes as more memory-like than did gamblers without prior win experiences. Belief and memory for future wins correlated positively with frequency of gambling and positive response expectancies (e.g. relaxation when gambling). Belief and memory for future losses correlated with negative outcome expectancies and endorsement of problem gambling risk. Expecations about future wins and losses are likely influenced by believed memory-like representations for future wins and losses.
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Accounting for the role of habit in regular saving
Cäzilia Loibl, David Kraybill & Sara Wackler DeMay
Journal of Economic Psychology, August 2011, Pages 581-592
Abstract:
The present study combines insights from social psychology and economics by examining the role of savings habits in regular saving. As frequently practiced, automatic, and goal-facilitated behaviors, savings habits play a critical role in everyday financial decisions. Using the Self-Report Habit Index developed by Verplanken and Orbell (2003), we collected and analyzed survey data to (1) validate the role of habit in regular saving; (2) test whether participation in a savings program, the Individual Development Account program, facilitates habit formation; and (3) examine the role of habit in individual's perception of financial strain. The results showed that habit mattered for regular saving. It influenced savings amounts above and beyond Theory of Planned Behavior and deposit frequency measures. Habit strength increased over time during program participation and savings habits reduced the stress of financially difficult situations.