Special issue on decision making under risk and uncertainty

Posted on Monday, Jun 15 2020

The research magazine of the University of Basel, UNI NOVA, has recently released a special issue on decision making under risk and uncertainty. In this issue, I and other decision scientists from psychology and economics were interviewed on the latest developments in our field, as well as regarding how the behavioral sciences may contribute to understanding how people approach the risks and uncertainties of modern life. As you will potentially notice, these interviews were still conducted in the pre-Corona era. That is, for once there is none of the omnipresent discussion in this respect. Nevertheless, it might be an interesting exercise to see which of the discussed concepts and findings apply to the current period, too!

Registered report on competitive decisions from experience published in JDM

Posted on Saturday, Apr 11 2020

We often (have to) make choices between risky options without knowing the possible outcomes upfront. Sometimes, however, we can obtain a preview through active information search (e.g., sampling reviews on Tripadvisor to choose one of two hotels). But what if other people simultaneously pursue the same goal, forcing us to make decisions from experience under competitive pressure ("only one room left at this price")? In this paper, I studied to what extent competition reduces pre-decisional search (and potentially choice performance) in different choice environments. A set of simulation analyses and empirical studies indicated that reduced search due to competitive pressure was particularly detrimental for choice performance in "wicked" environments, which contain rare events and thus require ample exploration to identify advantageous options. Interestingly, however, from a cost-benefit perspective and taking into account search costs, frugal search may not only be efficient in "kind" but also in "wicked" environments. For the full results, please have a look here:

Frey, R. (2020). Decisions from experience: Competitive search and choice in kind and wicked environments. Judgment and Decision Making, 15, 282-303. doi:10.1017/S1930297500007415 | PDF

On a side note, in this project I was up for some exploration myself: In the spirit of trying out new avenues for promoting transparent and reproducible research, I was committed to publish this paper as a registered report (RR). The idea of this relatively new publication format is to run the paper's theoretical rationale through the full peer-review process at a scientific journal, with the goal of obtaining "in-principle acceptance" before the empirical studies are conducted. It was a very interesting but sometimes also difficult process, as it may be particularly hard to convince reviewers of the soundness and importance of the research questions a-priori, without being able to present fancy results yet. So I am glad that this paper found a nice home at JDM, and I hope that more psychological journals will adopt the format of RRs soon!

For more on my research on decisions from experience, please also see the research section.

New paper in JPSP: Identifying robust correlates of risk preference

Posted on Monday, Mar 09 2020

In the behavioral sciences it has long been a goal to identify variables that are systematically associated with people's risk preferences. Yet, evidence concerning many "candidate correlates" (e.g., wealth, age, sex, education) has been mixed, because previous studies tended to focus on single variables (i.e., not taking into account many competing predictors) and to implement few operationalizations of risk preference. In our paper recently published in JPSP (see here for the PDF), we tackled this issue in a novel way: using specification curve analysis (SCA), we assembled all possible model specifications given the variables of our dataset, which resulted in over 1 million models (incl. simulation analyses). Thanks to our powerful sciCORE at the University of Basel, we could efficiently estimate these models using traditional OLS and Bayesian methods.

A key advantage of SCA is its possibility to visualize results of extensive modeling analyses transparently. The main findings indicated that a person's sex and age have robust and consistent associations with people's risk preferences, whereas other candidate correlates showed less consistent or no associations. The results also demonstrate the important role of construct operationalization when assessing people’s risk preferences: self-report measures picked up various associations with the proposed correlates, but behavioral measures largely failed to do so. In sum, we hope that our paper illustrates how exhaustive modeling analyses can provide conclusive answers to important theoretical issues in the behavioral sciences.

Frey, R., Richter, D., Schupp, J., Hertwig, R., & Mata, R. (2021). Identifying robust correlates of risk preference: A systematic approach using specification curve analysis. Journal of Personality and Social Psychology, 120, 538–557. doi:10.1037/pspp0000287 | PDF

Norming the assessment of risk preference in the financial advisory process

Posted on Monday, Dec 02 2019

Last week I was invited at the DIN (i.e., the German Institute for Standardization in Berlin) to contribute to the development of a new norm concerning the financial advisory process of bank customers. Specifically, the Markets in Financial Instruments Directive (MIFID) requires financial companies to collect and document a series of information concerning their clients – including their risk tolerance. Yet, these regulations do not specify how risk profiling ought to be carried out in practice. For this reason, an expert panel composed of different stakeholders (e.g., financial advisors, representatives of banks) currently works on establishing respective norms to standardize this process. I am glad that our scientific efforts can contribute to this discussion, and it was good to see that this panel has an open ear for the empirical insights we have recently published. I am excited to see how the norm will eventually be carved out!

No effect of birth order on adult risk taking

Posted on Monday, Jun 03 2019

Research in personality psychology has explored many potential sources for the emergence of individual differences. One of them is birth order: according to Sulloway’s childhood niche hypothesis, later-borns develop a more pronounced propensity to take risks than firstborns, because "risk taking is a useful strategy in the quest to find an unoccupied niche". That is, in their competition for parents' limited resources, risk taking might be instrumental for later-borns to attract attention. But do such early experiences shape personality lastingly, potentially leading to stable adult differences in risk taking? We analyzed three datasets to address this question. First, we employed an exhaustive modeling approach (i.e., specification curve analysis) to analyze a large panel dataset with self-report data. Second, we analyzed a large set of self-report and behavioral measures from the Basel-Berlin Risk Study. Third, we analyzed historical data on explorers and revolutionaries. The analyses of our three-pronged approach speak with one voice and suggest a clear conclusion: there exists no effect of birther order on adult risk taking. For the full details, please see here.