Too much choice leads to risky behaviour

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I think that like a lot of other research, our results highlight the importance of doing your research. If you want to make better choices, you need to spend time thoroughly investigating all of the potential outcomes.
Dr Thomas Hills
A new study conducted by researchers at the University of Warwick and the University of Lugano (USI) has revealed that the more choices people have, the riskier their decisions are likely to be. The academics, whose findings were published in the journal Psychonomic Bulletin & Review, found that when individuals were presented with larger choice sets, their resultant actions tended to be riskier than when fewer choices were made available to them.

The phenomenon, which has been labelled ‘search-amplified risk’ by the researchers, means that when people are presented with a large number of options, they are more likely to overestimate the probabilities associated with the rarest events. Essentially, as choice is increased, individuals tend to spend less time investigating the likelihood associated with the occurrence of each possible outcome.

To find out more about search-amplified risk, I spoke to one of its discoverers Dr Thomas Hills, Associate Professor at the University of Warwick’s Department of Psychology. I began by asking whether or not he and his colleagues had expected risk-taking behaviour to increase along with the number of available choices.

"We did find our results somewhat surprising," Dr Hills replied. "There has been a lot of research into ‘information overload’: a process whereby people’s choices become more random as their available options increase. From the outset, however, we had an alternative hypothesis. We suspected that if people were to conduct less research – if they were to sample each option fewer times – they would become more susceptible to making risky choices. Basically, we suspected that search-amplified risk existed, but we weren’t sure that we would observe it."

'Gambling game'

The researchers designed a gambling game which allowed them to analyse how the decision making of 64 participants was affected by the number of available choices. Subjects were asked to choose one from a varying number of boxes presented on a computer screen. Each box contained a different sum of money and had a certain probability of paying out. However, participants were given the opportunity to ‘sample’ each box by opening it as many times as they wanted to before making their final decision. Essentially, subjects were able to assess the probability of a payout.

The researchers divided their participants into two groups: one whose choices increased from two boxes through to 32, and another whose options were altered in the opposite direction. The study revealed that the number of available boxes affected the quality of subjects’ decision making. Whilst people made a higher total number of samples when more boxes were made available, they conducted fewer samples of each box. Moreover, the team found that whilst the quality of the ‘few-to-many’ group’s decision making deteriorated as their choice sets expanded, they tended to gather more information across all choice sets than their ‘many-to-few’ counterparts.

I asked Dr Hills whether larger choice sets make riskier options seem more appealing, or whether we are simply less capable of assessing risk in the face of large amounts of information.

"I think that we are dealing with a natural trade off," he replied. "Imagine that you have a certain amount of time to identify potentially lucrative stocks. You could study the performance of 1000 stocks during the course of a week, or you could look at the performance of 10 over a decade. If you choose the former approach, you are more likely to select a risky option whereas the latter will probably offer a safer long-term investment. However, the second method is less likely to reveal the best option from the entire set of available choices. I wouldn’t say that this is a problem with our cognition per se; it’s merely a trade off in the way that we search for information."

The findings suggest that limiting a person’s choices is the best way to maximise their chances of making a safe decision. However, if people were instructed to spend longer researching the risks associated with each option in a large choice set, would their chances of making a wise decision be increased?

"For sure," Dr Hills answered. "I think that like a lot of other research, our results highlight the importance of doing your research. If you want to make better choices, you need to spend time thoroughly investigating all of the potential outcomes. When you have lots of options, therefore, you must take the time to insulate yourself from the dangers of risk amplification."

Potential applications

The existence of search-amplified risk will be of great interest to those working within fields such as financial trading and gambling. However, the findings could also find applications within other areas.

"I think that there is a broad scope for potential applications," Dr Hills explained. "It is interesting to speculate about what those might be. Of course, we need to conduct further research in order to identify promising avenues but I can offer an example of how our results might be relevant in another area. Consider a person who is searching for a great diet. They might choose to investigate a couple of diets in order to figure out which is best for them in the long term. Alternatively, they could look into 20 diets, but they might not have the time to investigate any of those diets in great detail. Now, imagine that a diet comes with some form of celebrity endorsement; perhaps it is being advertised by an individual who has fared particularly well on that diet. When there are lots of options available and you don’t conduct in-depth research, you are much more likely to be influenced by a rare, potentially insignificant event. When a person conducts fewer samples of their individual options, therefore, rare occurrences such as celebrity success stories are more likely to drive the choices that they make."

Finally, I asked about the team’s plans for the future. How do the academics intend to further explore the phenomenon of search-amplified risk?

"Right now, we are looking into potential applications within the investment arena," Dr Hills concluded. "We are also busy doing some of the less interesting legwork: the basic mathematics that underlies our findings. However, we will definitely be conducting more exciting follow-up work in the future."



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