Preferences, prices, and ratings in risky decision making.

Abstract

Systematically different preference orders are obtained when different procedures are used to elicit preferences for gambles. Three new experiments found different preference orders with attractiveness ratings, risk ratings, buying prices, selling prices, avoidance prices, and strength-ofpreference judgments. Preference reversals persisted even when Ss were given financial incentives to motivate them to rank the gambles identically. Results were consistent with a change-ofprocess theory in which Ss are assumed to use different strategies in different tasks with the same scales. Attractiveness and risk ratings could be described by an additive combination of probability and amount, and prices could be predicted by a multiplicative combination of the same scales. Strength-of-preference judgments were consistent with a contrast-weighting model in which the weight of a dimension (either probability or amount) depends on the contrast between the 2 gambles along that dimension. Since the time of Bernoulli (1738/1954), normative theories of decision making have asserted that people should select the course of action with the higher expected utility. Although several definitions of utility have been proposed, most normative