Behavioral contrast in a two-option analogue task of financial decision making

The effects of an alternative course of action on sustained escalation and persistence in the face of failure was investigated using a computerized stock investment task. Subjects invested in "stock" in two "markets" that yielded returns according to two-component multiple variable-interval schedules. Both markets yielded equal but intermittent return rates during the first phase. In the second phase, one market ceased to yield returns, while the return rate for the other market was unchanged. During the second phase, behavioral contrast effects were evident. Investing in the market that ceased to yield returns dropped precipitously, and investing in the unchanged market increased significantly. Although the behavior may be economically "irrational," it is predictable from the matching law and shows that interactions among a history of intermittent returns in a course of action, current return rate, and currently available alternative courses of action are important determinants of persisting in, or withdrawing from, a failing course of action.