Washington, Nov 13 : When it comes to making rational decisions, feedback plays a key role, says a new study.
According to the researchers, majority of our choices fall into two categories: descriptive choice (based on what we are told) and experiential choice (based on our own personal experience).
Previous studies have shown that people will choose differently, depending on whether they are choosing based on experience or description.
In the new study sought to determine what causes people to choose differently in the two situations.
The research team from Indiana University were interested in testing if feedback in experiential choice is the cause of the different behaviour between the two choice situations.
The first situation resulted in earning them very little money, but they were guaranteed to receive it. The second option provided a very good chance (but not certain) to win a slightly larger amount of money.
However, in the other situation they had a chance of earning a lot more money, but the odds of earning it were very low (participants were provided with the probability of success for each option before making their choice).
Participants were randomly assigned to groups receiving either no feedback on their choices or receiving feedback (indicating their winnings in previous trials).
The researchers found that participants responded differently, depending on whether or not they received feedback, even though they were presented with complete descriptive information.
When people were given feedback about a situation, they began to ignore what they were explicitly told about the situation. The participants who did not receive feedback tended to overweight small probabilities.
The participants who did not receive feedback tended to overweight small probabilities. This resulted in them preferring the small guaranteed outcome when compared to the slightly larger but uncertain outcome while preferring the larger, but more uncertain outcome when compared to the same small guaranteed outcome.
The individuals who received feedback showed the exact opposite pattern of preference.
They underweighted small probabilities, preferring the slightly larger but uncertain outcome over the small guaranteed win, but chose the small, but certain win over the large but rare outcome.
This showed that the group receiving feedback began to treat the small probabilities in a more objective way.
The study appears in Psychological Science, a journal of the Association for Psychological Science.