Does the Order of Potential Outcomes Influence Economic Decision Making?

This study examines whether the order of potential outcomes influences risky decision-making. It is found that individuals select riskier alternatives much more frequently when the outcomes for each alternative gamble are specified from worst to best than when they are given from best to worst. This observed outcome order effect is more consistent with a change in the shape of the probability weighting function of the students rather than a shift in their level of risk aversion. These results suggest the existence of a recency effect in which individuals overemphasize the potential outcomes that are presented last relative to those listed earlier when making risky decisions. Several implications of our findings are discussed.