The Relative Importance of the Contrast and Assimilation Effects in Decisions Under Risk

ABSTRACT Past research on decisions under risk has documented two contradictory context effects: the contrast effect, where risk preferences in “target” tasks diverge from those in previous “surrounding” tasks, and the assimilation effect that implies the opposite bias. We present four web experiments (three preregistered) that clarify the conditions determining the relative prominence of these opposing effects. Our experiments focus on choice patterns in “target” tasks where participants choose between the status quo and a risky mixed gamble with an expected value of zero. Study 1 examines the impact of surroundings that differ from the target task with respect to the expected benefit from risk‐taking. The findings reveal a strong contrast effect: Decreasing the attractiveness of risk‐taking in the surrounding tasks increased the risk‐taking rate in the target tasks from 53.2% to 79.7%. Study 2 investigates the impact of surroundings that differ in the payoff domain. The findings indicate a strong assimilation effect: Decreasing the attractiveness of risk‐taking in the surrounding tasks decreased the risk‐taking rate in the target tasks from 74.7% to 36.5%. Additionally, the results revealed unpredicted and robust reversed loss aversion patterns which Studies 3 and 4 further clarify. Our findings (1) suggest that the isolated within‐task computations assumed by leading descriptive models overlook substantial contextual considerations, (2) clarify the factors determining the impact of the contrast and assimilation effects in decisions under risk, and (3) provide a theoretical framework for making useful predictions in various scenarios.