A change-of-process theory for contextual effects and preference reversals in risky decision making

Three experiments were conducted to investigate contextual effects and response mode effects (e.g., preference reversals) in risky decision making. Judgments of the worth of binary gambles were examined using two different contexts (positively and negatively skewed distributions of expected values) and two different response modes (attractiveness ratings and buying prices). Changes in the response mode affected the preference order of gambles, and changes in the context due to variations in skewing influenced the metric properties of the judgments but had a minimal effect on preference orders. Data were inconsistent with contingent weighting theory (Tversky, Sattath, & Slovic, 1988) and expression theory (Goldstein & Einhorn, 1987). Results could be described by a change-of-process theory which assumes that the method of elicitation influences the manner in which people combine information and arrive at judgments. Under certain conditions, attractiveness ratings could be described by an additive combination of subjective probability and utility ( s and u), whereas pricing judgments were accounted for by a multiplicative function, with the same scales of s and u in both tasks. When the range of outcomes included zero and negative values, preference orders for attractiveness ratings of gambles changed. This change in rank order was consistent with the hypothesis that inclusion of these levels caused more subjects to use a multiplicative rule for combining u and s when rating the attractiveness of gambles. Thus, preference reversals can be explained by the theory that the combination rule changes, while utilities and subjective probabilities remain constant.