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Here at the Royce Conference of University of Alberta, Marcia Spetch talked about her research on risky choice. She started out by stating that people tend to be risk-averse for gains and risk-prone for losses. She observes the behavior of pigeons to study how brains compute risk and chose risky or less risky options. As humans, pigeons are risk-averse on gain trials and risk-prone on gain trials. However, if pigeons and humans are allowed to experience several trials, these odds change and they become risk-prone for gains and risk-averse for losses over the course of the trials. She hypothesized that this might come from memory being better for extreme events such as the big wins, while losses are not seen as so extreme.
To test this hypothesis, she tested humans on a word task where the participants had to chose one of two words and then received a random reward for their choice. It turned out that the participants remembered the words best that had the least and the largest rewards. Another experiment included introducing less extreme rewards/losses in a standard choice assay. She found that the odds of being risk-averse or -prone didn't change in these trials whereas it did change for the extreme trials.
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