Sample-Based Variant of Expected Utility Explains Effects of Time Pressure and Individual Differences in Processing Speed on Risk Preferences

AbstractWhile previous models of economic decision-making offer descriptive accounts of behavior, they often overlook the computational complexity of estimating expected utility. Here, we seek to understand how both environmental and individual constraints on cognition shape our daily decision. Inspired by the predictions of a Sample-Based Expected Utility model developed previously, we reveal that both time pressure and individual differences in processing speed have a convergent effect on risk preferences during a risky decision-making task. Under severe time constraints, participants’ risk preferences manifested a strong framing effect compared to little time pressure in which choice adhered to the classic “fourfold pattern” of risk preference. Similarly, individual differences in processing speed, measured using an established task, predicted similar effects upon risk attitudes as extrinsic time pressure. These results suggest a converging contributions of environmental and individual limitations on risky decision-making, and provide a single process account for two well-established biases in behavioral economics.

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