When are we predictably irrational? Limited resource model and risk preferences
While classic economics theories have posited that individuals are rational decision-makers that make choices to maximize expected utility, recent research in both psychology and economics have repeatedly demonstrated that individuals deviate from the standard economic models in a predictable fashion. Our work aims to extend on such research by revealing when these predictable deviations occur, more specifically, when are individuals predictably irrational? Extending on the limited resource model (Vohs & Mascicampo, 2011), we carried out two studies to demonstrate that individuals were irrationally risk averse when they were depleted and had high perceived control. Study 1 revealed that individuals were more risk averse in situations of high control (i.e. investment) than low control (i.e. lottery), albeit insignificantly so. Whilst Studies 2a and 2b also yielded non-significant findings, a combined exploratory analysis showed that while individuals were risk averse in general, depleted individuals with high perceived control were more risk averse than their counterparts with low perceived control. Study 3 attempted to demonstrate that depletion was psychologically different from cognitive load. Despite our insignificant findings, these studies revealed that individuals became more “irrationally” risk averse when they were depleted and possessed high control and these effects differ from those of cognitive load.