The Effect of Hunger on Economic Decision Making ... -

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					 The Effect of Hunger on
Economic Decision Making
Critique of Symmonds, M., Emmanuel, J., Drew, M., Batterham,
                  R. & Dolan, R. (2010)

                    Andrew Ng & Will Rees
Metabolic State Alters Economic Decision
Making under Risk in Humans
   Aim: A study to define whether a change in our
    metabolic state influences our attitude to risk,
    specifically in making monetary decisions

   Hypothesis: Baseline metabolic reserves and alterations
    in metabolic state would systematically modulate
    decision making and financial risk taking in humans.

   Prediction: Individuals making monetary decisions
    would become more risk-averse after feeding if the meal
    had a larger impact on metabolic state (i.e. larger fall in
Metabolic State Alters Economic Decision
Making under Risk in Humans
   Used 24 male volunteers, later reduced to 19 after exclusions.
    During experiment, took levels of 2 hormones; 1 signalling nutrient
    intake and 1 indicating energy reserve levels.

   Participants presented with sequence of 200 paired lotteries, each
    constructed with varying probabilities of 6 possible monetary

                          Source: Symmonds et al. (2010)
Metabolic State Alters Economic Decision
Making under Risk in Humans

                          Source: Symmonds et al. (2010)
Metabolic State Alters Economic Decision
Making under Risk in Humans

                               Source: Symmonds et al. (2010)
Metabolic State Alters Economic Decision
Making under Risk in Humans

   Found that changes in metabolic state
    systematically altered economic decision making.

   When hormone levels showed larger nutritional
    intake, participants became more risk-averse

   A small effect of the meal, less than anticipated,
    correlated with greater risk seeking.
Prospect Theory
   “Prospect theory...emphasises that
    risk attitude in humans is reference
    dependent. When choosing between
    options yielding gains, humans are
    on average risk averse, while when
    choosing between options yielding
    losses below a reference point,
    humans make riskier choices”
    (Symmonds et. al. 2010)

   Losses are felt more strongly than
Prospect Theory - Application
 “Sensitivity to risk is systematically influenced by a
  metabolic reference point” (Symmonds el at., 2010)

 So, when animals are foraging in the wild, they become
  more less risk-averse when they are below the
  metabolic reference point, and vice-versa.

 This is linked to the hypothesis of Symmonds et. al. 2010
  – They believed changes in economic decision making
  would occur with participants either above or below
  the metabolic reference point.
Sample Size Neglect

   When judging the likelihood that a data set was
    generated by a particular model, people often
    fail to take the size of the sample into account:
    after all, a small sample can be just as
    representative as a large one
Sample Size Neglect
   In this experiment, there were only 19 male
    participants which is relative small!

                                      Source: Symmonds et al. (2010)
Sample Size Neglect

                      Source: Symmonds et al. (2010)
Overconfidence bias
   Overconfidence can be seen when people put
    too much faith in their own abilities and

   Overconfidence and high optimism could
    therefore have led experimenters to focus too
    much on their findings, which, in turn, could lead
    to confirmatory bias…
Confirmatory bias
   Strong prior beliefs can lead to ambiguous
    results being over-interpreted in order to back
    up original beliefs.

   They explain in discussion how their findings
    are consistent with their predictions and
    knowledge of prospect theory, in spite of the
    ambiguity of the results.
Other Issues - Gender Differences
   Women typically are thought to be more risk
    averse than men.

   Women were more than four times as likely as
    men to choose the risk-free gamble and about
    one-third as likely to choose the highest-risk
    gamble (Eckel & Grossman, 2002).
Other Issues - Gender Differences
   A meta-analysis by Byrnes, Miller,
    and Schafer (1999) reviewed over
    150 papers on gender differences
    in risk perception. They concluded
    that the literature “clearly”
    indicated that “male participants
    are more likely to take risks than
    female participants”
Other Issues – Personality Differences
   Previous findings have demonstrated that female scored
    higher than men on neuroticism in all countries, and men
    obtained higher means than women on psychoticism in
    34 countries and on extraversion in 30 countries (Lynn
    and Martin, 1997 ).

   Extraversion and openness predict risk-taking and
    conscientiousness predicts risk aversion (Soane and
    Chmiel, 2005).
Other issues – Individual Differences
   Emotion (Raghunathan & Pham, 1999)
    ◦ Sad people found to prefer higher risk/higher reward options
    ◦ Anxious people found to prefer low risk/low reward options

• Age
     o   Older people take fewer financial risks than younger

• Occupation/SSE

• Cultural
     • Study finds Singaporeans and Chinese to be less risk
       averse than Dutch and New Zealand people over both a
       gain and a loss frame when making a personal financial
       decision (Marshall et. al., 2011)
Improvements to study in student
   Similar method, but more comprehensive.

   Take account for all variables possible:
    ◦ Gender – Use both male and female undergrads,
      recruit more than just 19 participants.
    ◦ Personality – Administer broad personality tests to all
      participants before study, accounting for Big 5 traits,
      as well as smaller ones inc. trait mood and anxiety.
    ◦ Occupation – Use students from wide range of
      courses, including maths/stats, business, and others for
Implications and Applications
   Although only applicable to small number within
    the population, study does have some uses.

   Does prove, to an extent, when making
    economic decisions metabolic state and
    nutritional intake are important factors to
    consider (in men at least!).

   When making personal and/or professional
    economic decisions, should be manipulated
    around meal times.
Implications and Applications
   Can be applied to many
    real world situations:
    ◦ Making personal decisions
      about applying for
      mortgages, loans or credit
    ◦ Trading on stock exchange
      – Buying and Selling
      around local meal times.
    ◦ Going down to ladbrokes
      or casino only after a
      particularly heavy meal!
   Overall, Study has important
    points to it and is definitely
   Expands on previous research
    when it comes to risk taking and
    hunger, important when looking
    at prospect theory.
   Implications and Applications can
    become very important first step
    when looking deeper into issue
    of metabolic state and financial
    risk taking!
 However, several sample
  issues need to be addressed
  for future research.
 Larger, more representative
  samples in future research
  would provide much stronger
  insight into exactly how
  hunger and metabolic state
  influences financial decision
 Overall – very useful research
  if viewed as a first step.
  Replicating methodology with
  better samples could prove
  very useful!

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