More choices lead to bigger gambles: study
People make riskier decisions when they're given more choice, according to a study into how we behave when faced with large amounts of information.
What’s more, while our choices about risk invariably feel right when we
make them, many of these decisions end up hurting us in the end.
The researchers set up a gambling game where players were rated on their decision-making when faced with a large number of potential wagers. The result was that people took riskier gambles when they mistakenly felt that there was a higher probability of winning big.
The problem is that most of us don’t sample any given choice enough to understand the consequences associated with it, the study suggests. This leads to taking riskier choices more often.
In the study, 64 participants took part in a game where they had to choose one box out of a varying number of boxes presented on a computer screen. The game consisted of five turns, with either an increasing or decreasing number of boxes per turn.
Each box contained a different sum or money and a certain probability of paying out. Participants were able to 'sample' each box by opening it as many times as they liked to determine the payout amount and to try to deduce the probability of a payout.
Once they were satisfied with the information they'd gathered, they committed to their final choice by choosing a single box.
"People search more when they have many choices, increasing the likelihood that they will encounter rare, risky events," says lead researcher Thomas Hills.
"The problem is that they don’t sample any given choice enough to understand its underlying probabilities. This leaves the rare events sticking out like sore thumbs. As a consequence, people choose these riskier gambles more often."
When presented with several options, how do you make sure you’re picking the correct one?
By Gordon Powers, MSN Money