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Measuring the Subjective Value of Risky and Ambiguous Options using Experimental Economics and Functional MRI Methods
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Do We Become More Cautious for Others When Large Amounts of Money Are at Stake?

Eleonore Batteux1, Eamonn Ferguson2, Richard J Tunney3

  • 1Centre for the Study of Decision-Making Uncertainty, University College London, UK.

Experimental Psychology
|June 10, 2021
PubMed

Insights

People do not show increased caution for others in large financial decisions. Risk-taking increases for large gains, unlike in medical decisions, highlighting concerns about financial agents' excessive risk appetite.

Area of Science:

  • Behavioral Economics
  • Decision Science
  • Neuroeconomics

Background:

  • Financial decisions are often made by agents for others.
  • A discrepancy exists between cautious medical decisions for others and less cautious financial decisions.
  • Limited research addresses large financial stakes, hindering direct comparison to medical domains.

Purpose of the Study:

  • To investigate the impact of outcome magnitude on financial risk-taking when individuals make decisions for others.
  • To compare financial decision-making under risk with medical decision-making contexts.

Main Methods:

  • Two experiments were conducted involving participants choosing between safe and risky financial options.
  • The effect of outcome magnitude (large vs. small amounts) on risk-taking was analyzed.
  • Self-other decision-making differences were examined across gain and loss domains.

Main Results:

  • Decision-makers did not exhibit greater caution when deciding for others with large financial amounts.
  • Risk-taking significantly increased in the gain domain for large outcomes.
  • No significant self-other differences in risk-taking were observed in the loss domain for either outcome magnitude.

Conclusions:

  • The caution observed in medical decisions for others does not directly translate to financial decisions involving large sums.
  • Increased risk-taking in the financial gain domain with large amounts warrants attention.
  • Findings suggest potential for excessive risk-taking by financial agents, echoing prior concerns.

Keywords:
DMFOoutcome magnituderisk preferencessurrogate decision-making

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