Uncertain outcome presentations bias decisions: experimental evidence from Finland and Italy

Abstract

Even in their everyday lives people are expected to make difficult decisions objectively and rationally, no matter how complex or uncertain the situation. In this research, we study how the format of presentation and the amount of presented information concerning risky events influence the decision-making process, and the propensity to take risk in decision makers. The results of an exploratory survey conducted in Finland and in Italy suggest that decision-making behavior changes according to the way the information is presented. We provide experimental evidence that different representations of expected outcomes create distinct cognitive biases and as a result affect the decisions made. This identified change in the perception of risk has, to the best of our knowledge, not been identified nor directly studied previously in the scientific literature. The paper thus presents novel insights into managerial decision-making that are potentially relevant for decision support theory, with implications to decision-makers and for information providers. Understanding the impact of various forms of presentation of risk is crucial in being able to convey information clearly and in a way that avoids misunderstandings. The implications of the results on being able to avoid opportunistic manipulation of decisions, are also of great concern in many application areas. Social networks are more and more frequently being used as a source of information and in this context it is crucial to acknowledge the effect that different ways of presenting and communicating risky outcomes may have on the behavior of the target group. Here presented results may, for example, be highly relevant for marketing and advertising that is conducted by using social media or social networks.