Importance of variance preferences in gambling decisions.

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Abstract
The variance of outcomes in a gamble is presumed to be an important determinant of the gamble's attractiveness. However, because the variance is confounded with the gamble's probabilities and payoffs, behaviors that have been interpreted in past studies as indicative of variance preferences are subject to alternative interpretations. 3 experiments are reported in which variance was manipulated without changing the particular probabilities and payoffs that were explicitly displayed to S. Paid undergraduates served as Ss. Manipulation was made possible by the use of a specially constructed duplex gamble. Results indicated that variance is at best a minor determinant of gambling decisions. Variance preferences observed in previous studies appear to be artifacts generated by other decision strategies. (22 ref.) (PsycINFO Database Record (c) 2006 APA, all rights reserved)

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