Joshua Lewis is a doctoral student in the Decision Processes group, interested in consumer judgment and decision making. His research explores consumers’ motivation to improve their chances of success, to attain price discounts, and to make a tangible impact via charitable donations. In an additional stream of research, he has explored the mechanisms for anchoring effects (e.g. how extremeness aversion can cause anchoring; Lewis, Gaertig, & Simmons, 2018, Psychological Science.)
Motivation to Improve Chances of Success
Joshua has found that people are more motivated to increase their chances of success when success is already very likely. For example, people are more inclined to increase their probability of winning a prize from 80% to 90% than from 10% to 20%. This effect seems to result from a form of “prospective outcome bias”: people want to make decisions that they will feel good about after the outcome has been realized, and they expect to feel better about decisions that are likely to be followed by a successful outcome. With his advisor, Joe Simmons, Joshua has explored this mechanism (Lewis & Simmons, invited for revision at Journal of Experimental Psychology: General), and is continuing to test its boundary conditions in ecologically valid judgment tasks.
Inefficient Donation Behavior
With Deborah Small, Josh explores how, when people see cost-effectiveness information about a charitable donation (e.g. one mosquito net costs $2), they perversely donate less when the cost is cheaper. This result seems to arise because people want their donation to have a tangible impact, and when the cost of such an impact is cheaper, people can achieve it with a smaller donation. A remedy for this inefficiency is to express cost-effectiveness in terms of “items per dollar amount” (e.g. 5 nets provided per $10 donated), and leave the cost of providing one net unstated, rendering it less salient as a target donation amount (Lewis & Small, working paper).
Prospect Theory and Prices
People are generally more willing to travel across town to save $5 off a $15 purchase rather than to save $5 off a $125 purchase. Prospect Theory purports to explain this phenomenon via diminishing sensitivity to losses, but this research suggests that people do not consider these payments to be losses at all. Instead, it suggests that a $5 gain feels smaller relative to a reference price of $125 than $15. Contrary to Prospect Theory, all $5 gains are not the same (Lewis, Rees-Jones, Simonsohn, & Simmons, under review at Management Science).
Other research streams concern how anchoring effects are driven by the direction in which people adjust their estimates from numerical anchors, as well as the extent of this adjustment (Lewis & Simmons, working paper), how forgone options act as reference points (Green & Lewis, working paper), and how the best strategies to maintain trust depend upon relationship type (Moore, Lewis, Levine, & Schweitzer, working paper).
Before joining Wharton, Joshua worked in London as a fixed income analyst for Henderson Global Investors. He also completed a bachelor’s degree in Economics from the University of Warwick in the UK, and worked as a researcher for the Warwick Policy Lab.
Abstract: How do people decide whether to incur costs to increase their likelihood of success? In investigating this question, we developed a theory called prospective outcome bias. According to this theory, people make decisions that they expect to feel good about after the outcome has been realized. Importantly, people expect to feel best about decisions that are followed by successes – even when the decisions did not cause the successes. Consequently, they are most inclined to incur costs to increase their likelihood of success when success is already likely (e.g., people are more inclined to increase their probability of winning a prize from 80% to 90% than from 10% to 20%). We find evidence for this effect, and for prospective outcome bias, in nine experiments. In Study 1, we establish that people expect to evaluate decisions that precede successes more favorably than decisions that precede failures, even when the decisions did not cause the success or failure. Then, we document that people are more motivated to increase higher chances of success. Study 2 establishes this effect in an incentive-compatible laboratory setting, and Studies 3-5 generalize the effect to different kinds of decisions. Studies 6-8 establish that prospective outcome bias drives the effect (rather than regret aversion, waste aversion, or probability weighting). Finally, in Study 9, we find evidence for another prediction of prospective outcome bias: holding expected value constant, people prefer small increases in the probability of a large reward to large increases in the probability of a small reward.
Joshua Lewis and Deborah Small (Working), Ineffective Altruism: Giving Less When Donations Do More Good.
Abstract: Despite well-meaning intentions, people rarely allocate their charitable donations in the most cost-effective way possible. The manner in which cost-effectiveness information is presented can be a contributing factor. In four studies (N = 2,725), when we inform participants of the cost of a unit of impact (e.g. the cost of a mosquito net), they perversely donate less when the cost is cheaper. This result arises because people want their donation to have a tangible impact, and when the cost of such an impact is lower, people can achieve it with a smaller donation. A remedy for this inefficiency is to express cost-effectiveness in terms of “units per dollar amount” (e.g. 5 nets provided per $10 donated) and leave the cost of providing one tangible item unstated, rendering it less salient as a target donation amount. Across Studies 2 and 3, we demonstrate both the inefficiency and the effectiveness of the remedy for incentive-compatible donations decisions about providing meals, oral rehydration therapy, deworming medication, and measles vaccines.
Abstract: Prospect Theory assumes that decision makers are diminishingly sensitive to the magnitude of gains and losses. A well-known demonstration of this phenomenon involves people being more willing to travel across town to save $5 off a $15 purchase rather than to save $5 off a $125 purchase (e.g., the “Jacket/Calculator” scenario). In this paper, we present evidence that diminishing sensitivity to price is separate, different, and arguably inconsistent with Prospect Theory. Across four studies, we find that people exhibit diminishing sensitivity with respect to outcomes that do not align with their evaluations of gains and losses. Specifically, a reference point determines if a price is coded as a gain or a loss, but whatever that reference point, people are diminishingly sensitive to the absolute magnitudes of amounts considered.
Abstract: When estimating unknown quantities, people insufficiently adjust from values they have previously considered, a phenomenon known as anchoring. We suggest that anchoring is at least partially caused by a desire to avoid making extreme adjustments. In seven studies (N = 5,279), we found that transparently irrelevant cues of extremeness influenced people’s adjustments from anchors. In Studies 1-6, participants were less likely to adjust beyond a particular amount when that amount was closer to the maximum allowable adjustment. For example, in Study 5, participants were less likely to adjust by at least 6 units when they were allowed to adjust by a maximum of 6 units than by a maximum of 15 units. In Study 7, participants adjusted less after considering whether an outcome would be within a smaller distance of the anchor. These results suggest that anchoring effects may reflect a desire to avoid adjustments that feel too extreme.