<p>The prospect theory works/describes two stages in decision making under risk*.</p>
<h3>Stage 1:</h3>
<p>Clustering/grouping of the outcomes based on some heuristic. i.e the group the possible outcomes into groups and then choose  a reference point out of these.</p>
<h3>Stage 2:</h3>
<p>Now they switch to the expected utility theory,and act as a rational agent that makes a decision based on the expected value.</p>
<p>To quote <a href="https://en.wikipedia.org/wiki/Prospect_theory." rel="nofollow noreferrer">wikipedia</a>:</p>
<blockquote>
<p>The formula that Kahneman and Tversky assume for the evaluation phase
is (in its simplest form) given by</p>
<p><span class="math-container">$U = \sum_{i=1}^n w(p_i)v(x_i) = w(p_1)v(x_1) + w(p_2)v(x_2) + ... + w(p_n)v(x_n)$</span></p>
<p>where <span class="math-container">$U$</span> is the overall or expected utility of the outcomes to the individual making the decision,  <span class="math-container">$x_1, x_2, ..., x_n$</span>  are the potential outcomes and  <span class="math-container">$p_1, p_2, ..., p_n$</span> their respective probabilities.  The function <span class="math-container">$v$</span> is the value function that assigns a value to an  outcome.  The function <span class="math-container">$w$</span> is a probability weighting function and expresses that people   tend to overreact to small probability events, but underreact to medium and large probabilities.</p>
<p>Losses hurt more than gains feel good (loss aversion).
This differs greatly from expected utility theory, in which a rational
agent is indifferent to the reference point. In expected utility
theory, the individual only cares about absolute wealth, not relative
wealth in any given situation. The function  is a probability
weighting function and expresses that people tend to overreact to
small probability events, but underreact to medium and large
probabilities.</p>
</blockquote>
<p>Note that this is constrained by the assumption that the probabilities of outcomes are known.</p>
<p>To apply to your case, with any meaningfulness, you'll have to try to quantify the probability of failure in both cases and also assign a weight to the quantity of upside.</p>
<p>My guess is even though gambling has 50% probability you see the immediate(short time span) big wad of cash as high utility while the upside of finishing the project with a reward over a longer time span seems to reduce/lower the apparent utility.</p>
<p>I'd recommend <a href="http://lesswrong.com/lw/9wr/my_algorithm_for_beating_procrastination/" rel="nofollow noreferrer">this algorithm</a> to combat this. I am only trying it myself.</p>

CC BY-SA 3.0
2012-02-27T08:49:39.873Z
@ArtemKaznatcheev Added another link/recommendation and modified relevance text. Feedback please..:-)
Software Mechanic
CC BY-SA 3.0
2012-04-14T22:48:24.587Z
What are n, w, p,v, x equal to?
Chris S
CC BY-SA 3.0
2012-04-17T06:04:42.717Z
@ChrisS: copy, paste missed out the variables. But even the wiki page doesn't have explanation for w. I would guess it's the weighting the agent assigns to the outcome. but that's just a guess. need original citation for more clarity.
Software Mechanic
CC BY-SA 3.0
2012-02-03T03:54:37.593Z
Thanks for expanding the answer. I removed my downvote, but I think the answer can be further improved by showing how exactly it relates to the question, instead of simply suggesting that this is related.
Artem Kaznatcheev
CC BY-SA 3.0
2012-02-03T06:55:06.843Z
Have done a couple of lines, but don't think there's much to add without more specific details about the question...
Software Mechanic
CC BY-SA 3.0
2012-01-23T06:32:01.210Z
2012-04-25T21:13:10.850Z
2020-06-17T09:55:31.633Z
Software Mechanic
<p>The growing body of research in cognitive psychology is pointing to the fact that we may have overemphasized the processes of the brain as the center for determination of action.  We tend to look at the brain in terms of top-down processes but this is far from the case.  If you really want a rich and entertaining view of motivation read Damasio's book Descartes Error (1994).  </p>

<p>Damasio was the first to postulate the <a href="http://en.wikipedia.org/wiki/Somatic_marker_hypothesis" rel="nofollow">somatic marker hypothesis</a> or the theory that somatic bodily reactions were the source of heuristical choices.  Thus, the "gut" reaction truly is a somatic reaction of nerves outside of the CNS influencing the eventual choice of an action.  Literally you don't "feel" like taking an action.  The somatic marker hypothesis is gaining ground: </p>

<ul>
<li>Backed up by research such as inhibiton cost time analysis (e.g. the addition to emotionally more salient words to a go-no-go test increases reaction time cost) </li>
<li>Look at <a href="http://www.socialemotiveneuroscience.org/publications.html" rel="nofollow">Eddie Harmon-Jones</a> as an author for experiemnetal and neurological evidence.  </li>
<li>There is evidence that somatic markers are responsible for subliminal cognitive dissonance especially in racial bias.  People who were tricked into a biased response were more likely to offer assistance or judge favorably a member of a minority race given the opportunity- again somatic differences re-routing rational decision making.  </li>
</ul>

<p>I know its hard to believe neurons in the intestines might be responsible for your procrastination but if a warm cup of something in your hand makes you more likely to favoriably judge an object then.....   Read Damisio, really , you'll like it.</p>

CC BY-SA 3.0
2012-04-29T04:54:18.550Z
Could you include more specific reference for support of the somatic marker hypothesis?
Artem Kaznatcheev
CC BY-SA 3.0
2012-04-26T19:37:52.333Z
2012-04-29T04:53:25.010Z
2012-04-29T04:53:25.010Z
Joseph
<p>One reason for different outcomes in the 2 cases you highlight may be due to the different regulatory focus (higgins).</p>

<p>Not letting project go scrap is a preventive focus and as such comes with all the baggage that preventive regulatory focus has. One basically wants to avoid an undesired outcome and sees things as loss-nonloss (see the relation with prospect theory).</p>

<p>Winning a lottery on the other hand is a promotional focus- one wants to achieve a desired outcome and sees things in terms of profit-nonprofit.  </p>

<p>Now motivation or goal commitment is usually operationalized as commitment = Expectancy X  Value. </p>

<p>Consider a preventive focus- the goal is a necessity goal- commitment is constant (say 1 on  a 0-1 scale); as expectancy or chance of the outcome changes (the outcome becomes probable) , the Value of the goal adjusts (its no longer that important to work hard to prevent that project from going scrap) , but the commitment remains constant.</p>

<p>Consider a  promotional focus - there we get a multiplicative effect of expectancy on value. The moment expectancy is sufficient enough, the goal that is now within reach becomes more valuable and the commitment increases multiplicative and exponentially rather than linearly.    </p>

<p>All this has been experimentally demonstrated and is theory backed. In your case the preventive focus of 'project not scrapping' does not increase your commitment to the goal, rather makes the goal seem less valuable as the chances of not scrapping increases. On the other hand gambling is a promotional focus; as you make a hit and falsely believe that you are close to hitting the jackpot , you continue getting sucked into more gambling, and commitment keeps increasing and the value of jackpot also keeps increasing.    </p>

CC BY-SA 3.0
2012-03-08T16:18:56.353Z
2012-03-08T16:18:56.353Z
sandygautam
<p>Our subjective estimation of probability is affected by many irrational factors, one of which is the accessibility of exemplars (Availability Heuristic). Since we usually hear about lottery winners, and not so much about those who didn't win, we over-estimate the probability of winning. It may be similar with your estimation of the probability of the project becoming irrelevant - it is affected by how easy it is for you to imagine the project failing, something that can be affected by lots of irrational factors (like how self-confident the project leader is, or even worse, how much you like him/her).</p>

<p><a href="http://www.ted.com/talks/dan_gilbert_researches_happiness.html">Dan Gilbert has a nice TED talk</a> mentioning the Availability Heuristic in lottery and other similar biases in estimating gains and probabilities.</p>

CC BY-SA 3.0
2012-01-18T22:20:04.560Z
2012-01-19T03:04:19.310Z
2012-01-19T03:04:19.310Z
Ofri Raviv
<p>Sometimes, I work on a project where there is a chance that the whole project will become irrelevant before it is finished. I have noticed that even though I believe that the risk of this happening is small, it will significantly influence my motivation sometimes, though not on every project where there is such risk. On the other hand, when gambling, one is willing to do things, when the chance of reward is practically neglectable.</p>

<p>Are there any psychological experiments that can shed some light on why we react irrationally in these situations?</p>

CC BY-SA 3.0
2012-04-14T22:45:47.757Z
There's quite a lot of information on the subject in the book: How the Brain Works: http://www.amazon.com/Your-Brain-Work-Strategies-Distraction/dp/0061771295/ref=sr_1_1?s=books&ie=UTF8&qid=1334443558&sr=1-1 - which is largely based on academic research on dopamine and reward structures (or so the author states)
Chris S
<motivation><rationality>
How is motivation influenced by chance of reward?
David
# How is motivation influenced by chance of reward?

(Asked by: username_0 on 2012-01-18)

Sometimes, I work on a project where there is a chance that the whole project will become irrelevant before it is finished. I have noticed that even though I believe that the risk of this happening is small, it will significantly influence my motivation sometimes, though not on every project where there is such risk. On the other hand, when gambling, one is willing to do things, when the chance of reward is practically neglectable.

Are there any psychological experiments that can shed some light on why we react irrationally in these situations?

**Tags:** motivation, rationality

> **Comments:**
> **username_1**: There's quite a lot of information on the subject in the book: How the Brain Works: http://www.amazon.com/Your-Brain-Work-Strategies-Distraction/dp/0061771295/ref=sr_1_1?s=books&ie=UTF8&qid=1334443558&sr=1-1 - which is largely based on academic research on dopamine and reward structures (or so the author states)  

---

## 4 answers

### Answer by username_6 on 2012-01-18. Score: 10 | Accepted answer

Our subjective estimation of probability is affected by many irrational factors, one of which is the accessibility of exemplars (Availability Heuristic). Since we usually hear about lottery winners, and not so much about those who didn't win, we over-estimate the probability of winning. It may be similar with your estimation of the probability of the project becoming irrelevant - it is affected by how easy it is for you to imagine the project failing, something that can be affected by lots of irrational factors (like how self-confident the project leader is, or even worse, how much you like him/her).

[Dan Gilbert has a nice TED talk](http://www.ted.com/talks/dan_gilbert_researches_happiness.html) mentioning the Availability Heuristic in lottery and other similar biases in estimating gains and probabilities.


---

### Answer by username_2 on 2012-01-23. Score: 5

The prospect theory works/describes two stages in decision making under risk\*.

### Stage 1:

Clustering/grouping of the outcomes based on some heuristic. i.e the group the possible outcomes into groups and then choose a reference point out of these.

### Stage 2:

Now they switch to the expected utility theory,and act as a rational agent that makes a decision based on the expected value.

To quote [wikipedia](https://en.wikipedia.org/wiki/Prospect_theory.):

> The formula that Kahneman and Tversky assume for the evaluation phase
> is (in its simplest form) given by
>
> $U = \sum\_{i=1}^n w(p\_i)v(x\_i) = w(p\_1)v(x\_1) + w(p\_2)v(x\_2) + ... + w(p\_n)v(x\_n)$
>
> where $U$ is the overall or expected utility of the outcomes to the individual making the decision, $x\_1, x\_2, ..., x\_n$ are the potential outcomes and $p\_1, p\_2, ..., p\_n$ their respective probabilities. The function $v$ is the value function that assigns a value to an outcome. The function $w$ is a probability weighting function and expresses that people tend to overreact to small probability events, but underreact to medium and large probabilities.
>
> Losses hurt more than gains feel good (loss aversion).
> This differs greatly from expected utility theory, in which a rational
> agent is indifferent to the reference point. In expected utility
> theory, the individual only cares about absolute wealth, not relative
> wealth in any given situation. The function is a probability
> weighting function and expresses that people tend to overreact to
> small probability events, but underreact to medium and large
> probabilities.

Note that this is constrained by the assumption that the probabilities of outcomes are known.

To apply to your case, with any meaningfulness, you'll have to try to quantify the probability of failure in both cases and also assign a weight to the quantity of upside.

My guess is even though gambling has 50% probability you see the immediate(short time span) big wad of cash as high utility while the upside of finishing the project with a reward over a longer time span seems to reduce/lower the apparent utility.

I'd recommend [this algorithm](http://lesswrong.com/lw/9wr/my_algorithm_for_beating_procrastination/) to combat this. I am only trying it myself.

> **Comments:**
> **username_3**: Thanks for expanding the answer. I removed my downvote, but I think the answer can be further improved by showing how exactly it relates to the question, instead of simply suggesting that this is related.  
> **username_2**: Have done a couple of lines, but don't think there's much to add without more specific details about the question...  
> **username_2**: @ArtemKaznatcheev Added another link/recommendation and modified relevance text. Feedback please..:-)  
> **username_1**: What are n, w, p,v, x equal to?  
> **username_2**: @ChrisS: copy, paste missed out the variables. But even the wiki page doesn't have explanation for w. I would guess it's the weighting the agent assigns to the outcome. but that's just a guess. need original citation for more clarity.  

---

### Answer by username_4 on 2012-04-26. Score: 4

The growing body of research in cognitive psychology is pointing to the fact that we may have overemphasized the processes of the brain as the center for determination of action. We tend to look at the brain in terms of top-down processes but this is far from the case. If you really want a rich and entertaining view of motivation read Damasio's book Descartes Error (1994).

Damasio was the first to postulate the [somatic marker hypothesis](http://en.wikipedia.org/wiki/Somatic_marker_hypothesis) or the theory that somatic bodily reactions were the source of heuristical choices. Thus, the "gut" reaction truly is a somatic reaction of nerves outside of the CNS influencing the eventual choice of an action. Literally you don't "feel" like taking an action. The somatic marker hypothesis is gaining ground:

* Backed up by research such as inhibiton cost time analysis (e.g. the addition to emotionally more salient words to a go-no-go test increases reaction time cost)
* Look at [Eddie Harmon-Jones](http://www.socialemotiveneuroscience.org/publications.html) as an author for experiemnetal and neurological evidence.
* There is evidence that somatic markers are responsible for subliminal cognitive dissonance especially in racial bias. People who were tricked into a biased response were more likely to offer assistance or judge favorably a member of a minority race given the opportunity- again somatic differences re-routing rational decision making.

I know its hard to believe neurons in the intestines might be responsible for your procrastination but if a warm cup of something in your hand makes you more likely to favoriably judge an object then..... Read Damisio, really , you'll like it.

> **Comments:**
> **username_3**: Could you include more specific reference for support of the somatic marker hypothesis?  

---

### Answer by username_5 on 2012-03-08. Score: 3

One reason for different outcomes in the 2 cases you highlight may be due to the different regulatory focus (higgins).

Not letting project go scrap is a preventive focus and as such comes with all the baggage that preventive regulatory focus has. One basically wants to avoid an undesired outcome and sees things as loss-nonloss (see the relation with prospect theory).

Winning a lottery on the other hand is a promotional focus- one wants to achieve a desired outcome and sees things in terms of profit-nonprofit.

Now motivation or goal commitment is usually operationalized as commitment = Expectancy X Value.

Consider a preventive focus- the goal is a necessity goal- commitment is constant (say 1 on a 0-1 scale); as expectancy or chance of the outcome changes (the outcome becomes probable) , the Value of the goal adjusts (its no longer that important to work hard to prevent that project from going scrap) , but the commitment remains constant.

Consider a promotional focus - there we get a multiplicative effect of expectancy on value. The moment expectancy is sufficient enough, the goal that is now within reach becomes more valuable and the commitment increases multiplicative and exponentially rather than linearly.

All this has been experimentally demonstrated and is theory backed. In your case the preventive focus of 'project not scrapping' does not increase your commitment to the goal, rather makes the goal seem less valuable as the chances of not scrapping increases. On the other hand gambling is a promotional focus; as you make a hit and falsely believe that you are close to hitting the jackpot , you continue getting sucked into more gambling, and commitment keeps increasing and the value of jackpot also keeps increasing.


---

