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Observing others' behavior and risk taking in decisions from experience

Listed author(s):
  • Eldad Yechiam
  • Meir Druyan
  • Eyal Ert
Registered author(s):

    This paper examines how observing other people's behavior affects risk taking in repeated decision tasks. In Study 1, 100 participants performed experience-based decision tasks either alone or in pairs, with the two members being exposed to each others' choices and outcomes. The tasks involved either equiprobable gains and losses or frequent small gains and rare large losses. The results indicated that, in both risk types, the social exposure increased the proportion of risky selection, but its effect was stronger in the rare-loss condition. In Study 2 the rare-loss task was administered to 32 study participants, with a target individual observing the choices of a paired individual. The results showed that observing others, rather than being observed, led to the pattern of increased risk taking. The findings of the two studies indicate the importance of distinguishing different types of risky situations and shed light on contradictory findings in the literature.

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    Article provided by Society for Judgment and Decision Making in its journal Judgment and Decision Making.

    Volume (Year): 3 (2008)
    Issue (Month): 7 (October)
    Pages: 493-500

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    Handle: RePEc:jdm:journl:v:3:y:2008:i:7:p:493-500
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    1. Ariely, Dan & Levav, Jonathan, 2000. " Sequential Choice in Group Settings: Taking the Road Less Traveled and Less Enjoyed," Journal of Consumer Research, Oxford University Press, vol. 27(3), pages 279-290, December.
    2. Ratner, Rebecca K & Kahn, Barbara E, 2002. " The Impact of Private versus Public Consumption on Variety-Seeking Behavior," Journal of Consumer Research, Oxford University Press, vol. 29(2), pages 246-257, September.
    3. Charness, Gary & Grosskopf, Brit, 2004. "What makes cheap talk effective? Experimental evidence," Economics Letters, Elsevier, vol. 83(3), pages 383-389, June.
    4. Brit Grosskopf & Ido Erev & Eldad Yechiam, 2006. "Foregone with the Wind: Indirect Payoff Information and its Implications for Choice," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(2), pages 285-302, August.
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