Knowledge-based choice

This study tested the distinction between knowledge-based choices and gambling decisions. Gambling decisions contain stated probabilities, and success depends on chance only. In knowledge-based decisions, in contrast, the probabilities are usually unknown and the outcomes of a choice depend on a person's ability or knowledge. Three different theoretical accounts were used to predict knowledge-based choices: prospect theory, the competence hypothesis, and probability-focused reasoning. Students (64 women, 93 men, M=22.4 yr.) chose between a knowledge bet and a sure gain of equal expected value. Analysis showed people prefer a knowledge bet over the sure gain, if the probability of winning is high-in contrast to prospect theory, which predicts the opposite. Both the competence hypothesis and probability focused reasoning can explain these differences, but prospect theory does not. It appears knowledge-based choices and gambling decisions capture different facets of decision-making.