Emotion and Knowledge in Decision Making under Uncertainty

This paper presents four incentivised experiments analysing jointly the separate role of immediate integral emotions and knowledge in individual decision making under ambiguity. Reactions to a natural source of uncertainty (i.e., forthcoming real-world election results) were measured using both computed decision weights derived from individual choices and judgmental probabilities determined from the subjects’ estimated likelihood of election outcomes. This study used self-reports to measure emotions aroused by the prospective election victory of a party/coalition of parties, and both self-assessed and actual competence to measure knowledge of politics. This paper found evidence of both preference for ambiguity in the gain domain and of likelihood insensitivity, namely the tendency to overweight unlikely events and to underweight likely events. This paper also shows that a superior knowledge of politics was associated with a preference for ambiguity (i.e., the elevation of the decision weighting function for gains). Both stronger positive emotions and superior knowledge generally have asymmetric effects on likelihood insensitivity (i.e., the curvature of the decision weighting function), each being associated separately with higher overweighting of unlikely election outcomes.