Tempus Fugit: Time Pressure in Risky Decisions

We study the effects of time pressure on risky decisions for pure gain prospects, pure loss prospects, and mixed prospects involving both gains and losses. In two experiments we find that time pressure has no effect on risk attitudes for gains, but increases risk aversion for losses. For mixed prosp...

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Bibliographic Details
Published in:Management science 2013-10, Vol.59 (10), p.2380-2391
Main Authors: Kocher, Martin G., Pahlke, Julius, Trautmann, Stefan T.
Format: Article
Language:English
Subjects:
ASPIRATION LEVEL
aspiration levels
Attitudes
AVERSION
Behavior
Behavioral economics
CHOICE
Decision making
Economic uncertainty
ECONOMICS
Economics and Business
Ekonomi och näringsliv
EXPECTED UTILITY
Expected values
Experimental economics
Experiments
Financial economics
Financial risk
gain seeking
GENDER-DIFFERENCES
Heuristic
INCENTIVES
Loss aversion
Management science
MONEY
PROBABILITY
PROSPECT-THEORY
Risk aversion
Risk management
Securities markets
Stress
Studies
Time pressure
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Summary:We study the effects of time pressure on risky decisions for pure gain prospects, pure loss prospects, and mixed prospects involving both gains and losses. In two experiments we find that time pressure has no effect on risk attitudes for gains, but increases risk aversion for losses. For mixed prospects, subjects become simultaneously more loss averse and more gain seeking under time pressure, depending on the framing of the prospects. The results suggest the importance of aspiration levels, and thus the overall probability to break even, under time pressure. We discuss the implications of our findings for decision-making situations that involve time pressure. This paper was accepted by Uri Gneezy, behavioral economics.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.2013.1711