Society of Decision Professionals (SDP) and the Decision Analysis Society (DAS) invites you to join our June 2025 Webinar:
“Risk Matters Less When Options Differ Qualitatively”
Featuring: George Wu, John P. and Lillian A. Gould Professor of Behavioral Science - University of Chicago Booth School of Business
Abstract:
Risk aversion for moderate likelihood gains is perhaps the best-known stylized fact from decision research. Though studies documenting it have largely focused on decisions concerning money, such behavior is presumed to prevail very generally, across diverse domains. We investigate the validity of this generalization by contrasting two types of decisions. In unimodal choices, outcomes differ quantitatively but not qualitatively, rendering inter-option comparisons “apples-to-apples.” Choices between guaranteed and uncertain monetary payoffs are canonical examples; or consider sure receipt of a product versus a chance at several units of the same product. In crossmodal choices, outcomes differ qualitatively (and sometimes quantitatively), rendering comparisons “apples-to-oranges.” Consider sure receipt of one product versus uncertain receipt of another. Our studies () reveal a pair of patterns by which, contrary to straightforward generalizations, risk matters less crossmodally. First, crossmodal preferences exhibit less aversion to fair risk. Second, crossmodal preferences vary less across risk levels: as risk becomes increasingly unfavorable, they do not develop as much additional distaste for it; and, as it becomes increasingly favorable, they do not develop as much appetite for it. These patterns of insensitivity jointly engender an interaction: relative to unimodal settings, crossmodal settings yield less aversion to unfavorable and fair risk but more aversion to favorable risk. To account for this interaction, we present a model in which weighing risk crossmodally requires additional mental operations. Such extra cognitive requirements introduce error, reduce confidence, and thereby diminish impact. Crossmodal settings thus dilute weighing of risk as a basis for preference construction.
Meet the Speaker:
George Wu
John P. and Lillian A. Gould Professor of Behavioral Science
University of Chicago Booth School of Business
George Wu is the John P. and Lillian A. Gould Professor of Behavioral Science at University of Chicago Booth School of Business. He studies the psychology of decision making; goal-setting and motivation; and cognitive biases in bargaining and negotiation. Wu's research has been published widely in a number of journals in economics, management science, and psychology. Wu is a Department Editor of Management Science and is on numerous other editorial boards. He earned a bachelor's degree cum laude in applied mathematics with a concentration in decision and control in 1985, a master's degree in applied mathematics in 1987, and a PhD in decision sciences in 1991, all from Harvard. Wu was previously on the faculties of Wharton School and Harvard Business School, and prior to graduate school, Wu worked as a decision analyst at Procter Gamble.
Moderator:
Yael Grushka-Cockayne
Past President, Decision Analysis Society, INFORMS
Professor Yael Grushka-Cockayne's research and teaching activities focus on decision analysis, data science, business analytics, forecasting, forecast aggregation and the wisdom of crowds, decision analysis, project management, and behavioral decision-making. Yael is an award-winning teacher and was named one of "21 Thought-Leader Professors" in Data Science. At Darden Yael teaches courses on Decision Analysis, Project Management, and Data Science in Business. Yael's "Fundamentals of Project Planning and Management" Coursera MOOC and “Data Science for Business” HarvardX course have over 300,000 enrolled, across 200 countries worldwide. Yael is an Associate Editor at Management Science, Operations Research, Decision Analysis and INFORMS Journal of Data Science.
Before starting her academic career, she worked in San Francisco as a marketing director of an ERP company. As an expert in the areas of decision analysis and critical thinking, project management, and digital transformation, she has served as a consultant to international firms in the ed-tech, aerospace and pharma industries, such as Merck Serono, Pfizer, Eli Lilly, 2U, High Speed 2 Rail, PPL Electric Utilities, Heathrow Airport and Eurocontrol, Network Rail UK and the Department for Transport UK, and Dunlop Aerospace.