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'Too much choice leads to riskier decisions'- 27-Mar-2013
London: Having too many options may lead you to take riskier decisions, according to a new study.
The more choices people have, the riskier the decisions they make, according to the study which sheds light on how we behave when faced with large amounts of information. Researchers at the University of Warwick and the University of Lugano set up a gambling game in which they analysed how decision-making is affected when people are faced with a large number of potential gambles. They found that a bias in the way people gather information leads them to take more risks when they choose a gamble from a large set of options. This means that, when faced with a large number of choices - each having outcomes associated with different probabilities of occurring - people are more likely to overestimate the probabilities of some of the rarest events. The study on 64 participants, published in the journal Psychonomic Bulletin and Review, found that with large choice sets, people took riskier gambles based on a flawed perception that there was a higher probability of "winning big" - but in reality they more often went away empty-handed. "It's not that people just give up and make random decisions when faced with a large number of options. They are making rational decisions, but these decisions are based on faulty information gathering," Dr Thomas Hills of the Department of Psychology at the University of Warwick said. "The problem is with the information search strategies people use when faced with a large number of options. People search more when they have many choices, increasing the likelihood that they will encounter rare, risky events," Hills said in a statement. "The problem is that they don't sample any given choice enough to understand its underlying probabilities. This leaves the rare events sticking out like sore thumbs. As a consequence, people choose these riskier gambles more often," he said. The researchers also found differences in decision-making between the "many-to-few group" - those who started with a large number of choices which were then decreased – and the "few-to-many group" where the order was reversed. The study showed that people who started with smaller choice sets were more likely than the other group to gather more information across all choice set sizes. Conversely, people who started with a large choice set gathered less information than the other group when it came to the smaller choice sets.
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