Researchers at the University of Warwick in the UK and the University of Lugano in Switzerland found that, if people are given too many options or choices, they will often execute riskier decision making.
For the study, published in Psychonomic Bulletin and Review, researchers created a gambling game so they could analyze how a large number of options can affect decision-making.
This process resulted in a phenomenon which researchers called search-amplified risk. The term defines when people are faced with a seemingly innumerable set of choices they are more likely to overestimate the probability of potential but rare events such as high rewards.
The study demonstrated the flawed perception of assuming a higher probability of winning encouraged participants to take chancier gambles. This often resulted in a loss, as decisions are based on far-fetched assumptions and not a realistic assessment of the numerous options. Decisions were made with faulty information gathering and search strategies.
Essentially, people will tend to make riskier choices when they encounter multiple options in hopes of attaining the rare win.
The study had 64 undergraduates from the University of Warwick, who received course credit and were monetary compensated (permitted to keep their winning) participate. The group took part in a game where they had to select one box from a pool of boxes on a computer screen. The game consisted of five attempts. Each turn resulted in an increase or decrease in the number of available boxes to select from. Each box contained a different sum of money and each had a certain probability of paying out.
The first group initially chose from two boxes which then increased to four, eight, 16, and then 32. Another group started with 32, with a decrease to 16, eight, four, then two.
Participants were allowed 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 payout. After, they were asked to commit to a final choice of a single box.
The overall number of available boxes was found to affect the quality of decision making among the undergrads. With a higher number of boxes, people made a higher total number of samples. One group on average made 12 samples when there were two boxes on screen and 50 samples when there were 32 boxes on screen. The increase in sampling was not in proportion with the increase in box numbers.
The study showed that people who started with smaller choice set were more likely than the other group to gather more information before making a selection. Those who started with a large choice set gathered less information than the other group when it came to the smaller number of options. However, when there were many options, neither group was able to consistently choose options with the highest expected values.
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