THE EFFECT OF EXPLICIT PROBABILITIES ON DECISION WEIGHTS AND ON THE REFLECTION EFFECT

An experiment is presented that explores the finding that a request to judge probabilities can bias subsequent decisions (Erev et al., 1993). Subjects chose among gambles whose outcomes were determined by the occurrence of events in a video game environment. The probabilities of the events could be assessed based on the visual display. In the no-probabilities condition the subjects simply indicated their choices. In the subjective-probability condition subjects first estimated probabilities and then made choices. In the objective-probability condition, subjects saw the actual probabilities instead of the events when making their choices. The results suggest that the availability of explicit probabilities (both subjective and objectives) decreases the subjects' sensitivity to the outcome dimension and, hence, increases the reflection effect; i.e. subjects in the subjective- and objective-probability conditions showed stronger risk aversion when the gambles involved possible profit and stronger risk seeking when the gambles involved possible losses than in the no-probabilities condition. In addition, the subjective assessments impaired the quality of the decisions in term of the subjects' expected profit. Theoretical and practical implications of the results are discussed.