TRANSLATION OF GAMBLES AND ASPIRATION LEVEL EFFECTS IN RISKY CHOICE BEHAVIOR.

Two recent models of risky decision-making have emphasized the importance of a target return or a reference point in determining preferences and choices among gambles. Target returns and reference points represent variations on the concept of an aspiration level, an old idea in theories of decision-making. Additional evidence on the need to incorporate such a concept in the analysis of risky choice behavior is presented. In three experiments, the relationship of pairs of gambles to an assumed reference point was varied by adding or subtractng a constant amount from all outcomes. The results demonstrate that such translations of outcomes can result in the reversal of choice within pairs of gambles.

Duke Scholars

Author John W. Payne Fuqua School of Business

Author Danny J. Laughhunn Fuqua School of Business