Many of the decisions that humans make involve uncertain outcomes. For example, when deciding whether to participate in a raffle, people do not know ahead of time whether they will win, and the precise probability of winning is often unknown as well. When a person is making a choice that involves uncertainty, one factor that might influence their decision making is their affective state. One type of stimulus that can influence a person’s affective state is negative news (Thompson et al., 2019; McNaughton-Cassill, 2001). In this study, we examined the effects of watching negative news on decision making under uncertainty.
Uncertain outcomes can be categorized as risky or ambiguous (Ellsberg, 1961). Decisions are risky when the probabilities of the outcomes are known, but the actual outcomes are still dependent on chance. For example, imagine that in a bag of poker chips, there are 30 winning chips and 70 losing chips. If someone decides to pull a random chip from that bag, they will have a 30% chance of winning and a 70% chance of losing. The exact outcome is unknown, but the probabilities are known. On the other hand, ambiguous decisions are ones in which the probabilities of all outcomes are not known ahead of time. For example, imagine a bag containing 100 chips, in which there are 25 winning ones, 25 losing ones, and 50 chips that are either winning or losing. There is a guaranteed probability of at least 25% of pulling a winning chip, and at least 25% probability of pulling a losing chip, but it is unknown if the remaining chips are mostly losing, mostly winning, or evenly split. People tend to avoid situations that involve uncertain outcomes (Pratt, 1964; Mather et al., 2012). However, people tend to avoid ambiguous situations even more than risky situations (Ellsberg, 1961).
These attitudes toward risk and ambiguity may change when people are in different affective states. For example, mood is an enduring affective state marked primarily by a subjective feeling (Scherer, 2005). It has been proposed that being in a mood leads to the processing of information in a way that is congruent with the mood (Eldar et al., 2016; Lerner & Keltner, 2001; Slovic et al., 2007). If someone is feeling good, then they will generalize that feeling and be more optimistic. If someone is feeling bad, then they are likely to be more pessimistic. It follows that, when someone is in a good mood, they will be more likely to take risks, since they are more likely to believe that the outcome will be in their favor. There is some evidence for this idea. For example, analyses of “big data” show that people buy more lottery tickets when local sports teams have won games, when the weather is sunny, and when the language in Twitter posts is especially positive (Otto et al., 2016; Otto & Eichstaedt, 2018). On the other hand, a negative mood may lead to more risk aversion. When people were feeling negative affect after reading negative statements, they tended to be risk averse (Deldin & Levin, 1986). In another study, people who watched negative movie clips prior to decision making tended to choose a small but certain option over a larger but uncertain option (Hu et al., 2015).
Although there is evidence that affective states influence risk aversion, there are also studies showing null results (e.g., Sokol-Hessner et al., 2016). When the probabilities are known during risky decision making, it could be that mood has less of an influence on choice, because people do not have to make an initial judgment about how probable an outcome is. Affective states might have a larger influence on decisions that require a person to assess risk first, before they decide whether they will act on that risk. In other words, negative affect may increase ambiguity aversion even more so than risk aversion. Some previous research is consistent with this thesis. First, when people are reading a negative story about death, they judge all causes of death as being more probable, showing that they perceive negative events as more likely when they are in a bad mood (Johnson & Tversky, 1983). When people are viewing ambiguous stimuli, such as surprised faces, they are more likely to interpret them as negative if they are anxious (Neta & Brock, 2021). Situations that induce anxiety, an extensive worrisome state (Akiskal, 1998) that has been linked to fear (Reiss, 1987), have shown similar effects on ambiguity intolerance (Richards et al., 2002; Eysenck et al., 1991). Yet another study showed that people become more ambiguity-averse when they are presented with negative stimuli at the time of making a decision (Sambrano et al., 2024). All of these findings can be explained by theories of mood-congruent processing. Because ambiguous probabilities do not present the “full picture” of the chances of an outcome happening (and keeps them hidden from the participant), they are open to interpretation. Participants feeling negative affect may interpret ambiguous situations in a pessimistic manner. Because of this negative interpretation, they are then more likely to avoid gambles with ambiguous outcomes. However, not all research is consistent with this theory, since there have been studies where negative affect-inducing stimuli, such as threat of shock or acute psychological stress, have had no impact on ambiguity or risk aversion (Sambrano et al., 2022).
Most of the stimuli used to induce negative affect have been administered in the setting of a controlled lab experiment. Some of these stimuli, such as movie clips (Hu et al., 2015), and negative statements (Deldin & Levin, 1986) may not be encountered on a daily basis. In the current study, we examined the effect of induced negative affect on risk and ambiguity aversion using a novel affective manipulation: news reports. With increased globalization, news stories can travel to every corner around the world (e.g., through apps and TV news channels). Negative news has been cited by the literature as one of the most common and consistent causes of negative affect (Thompson et al., 2019; McNaughton-cassill, 2001; Bauldry & Stainback, 2022; Montazeri et al., 2023). Thus, it is important to examine the effects that negative news has on day-to-day decisions under uncertainty.
Although the literature on this topic is mixed, we pre-registered the hypotheses that people who watched a negative news story prior to making decisions would be both more risk and ambiguity averse compared to people who watched a neutral news story prior to decision making. Of course, it is possible that the negative news exposure would only increase ambiguity, but not risk aversion (Raio et al., 2022). It is also possible that negative news exposure would have no effect on decision making under uncertainty (Sambrano et al., 2022). In Study 1, we investigated this question in a relatively small group of college students. In Study 2, we attempted to replicate our results in a larger, online sample.