Stakes and probabilities in information purchase

Abstract

Subjects purchased information to increase P (probability of a correct decision) in tasks with net expected value held constant. In Experiment 1, Ss purchased more information, and thereby increased P, when stakes were higher. Experiment 2 showed a positive relation between stakes and P regardless of which variable was independent. The hypothesis that Ss were holding variance constant could not account for this tradeoff, however, because Ss treated P as relatively more important than stakes. Finally, under the assumption that risk increases with stakes and decreases with P, the riskier Ss treated P as relatively more important than did the less risky Ss.