Recent Investigations into the Psychology of Decision Making have Sparked Interest Among Scholars

Reading Passage Question

Recent investigations into the psychology of decision making have sparked interest among scholars seeking to understand why governments sometimes take gambles that appear theoretically unjustifiable on (5) the basis of expected costs and benefits. Researchers

have demonstrated some significant discrepancies between objective measurements of possible decision outcomes and the ways in which people subjectively value such possible results. Many of these (10) discrepancies relate to the observation that a possible outcome perceived as a loss typically motivates more strongly than the prospect of an equivalent gain. Risk taking is thus a more common strategy for those who believe they will lose what they already possess than it (15) is for those who wish to gain something they do not have.

Previously, the notion that rational decision makers prefer risk-avoiding choices was considered to apply generally, epitomized by the assumption of many (20) economists that entrepreneurs and consumers will choose a risky venture over a sure thing only when the expected measurable value of the outcome is sufficiently high to compensate the decision maker for taking the risk. What is the minimum prize that would (25) be required to make a gamble involving a 50 percent

chance of losing $100 and a 50 percent chance of winning the prize acceptable? It is commonplace that the pleasure of winning a sum of money is much less intense than the pain of losing the same amount; (30) accordingly, such a gamble would typically be accepted only when the possible gain greatly exceeds the possible loss. Research subjects do, in fact,

commonly judge that a 50 percent chance to lose $100 is unacceptable unless it is combined with an equal (35) chance to win more than $300. Nevertheless, the recent studies indicate that risk-accepting strategies are common when the alternative to a sure loss is a substantial chance of losing an even larger amount, coupled with some chance—even a small one—of (40) losing nothing.

Such observations are quite salient to scholars of international conflict and crisis. For example,

governments typically are cautious in foreign policy initiatives that entail risk, especially the risk of armed (45) conflict. But nations also often take huge gambles to retrieve what they perceive to have been taken from them by other nations. This type of motivation, then, can lead states to take risks that far outweigh the objectively measurable value of the lost assets. For (50) example, when Britain and Argentina entered into armed conflict in 1982 over possession of the Falkland

Islands—or Malvinas, as they are called in Spanish— each viewed the islands as territory that had been taken from them by the other; thus each was willing to (55) commit enormous resources—and risks—to recapturing them. In international affairs, it is vital that each actor in such a situation understand the other’s subjective view of what is at stake.

“Recent investigations into the psychology of decision making have sparked interest among scholars“- is a GMAT reading comprehension passage with answers. Candidates need a strong knowledge of English GMAT reading comprehension.

This GMAT Reading Comprehension consists of 5 comprehension questions. The GMAT Reading Comprehension questions are designed for the purpose of testing candidates’ abilities in understanding, analyzing, and applying information or concepts. Candidates can actively prepare with the help of GMAT Reading Comprehension Practice Questions.

Solution and Explanation

Question1
Suppose that a country seizes a piece of territory with great mineral wealth that is claimed by a neighboring country, with a concomitant risk of failure involving moderate but easily tolerable harm in the long run. Given the information in the passage, the author would most likely say that

(A) the country’s actions are consistent with previously accepted views of the psychology of risk-taking
(B) the new research findings indicate that the country from which the territory has been seized probably weighs the risk factors involved in the situation similarly to the way in which they are weighed by the aggressor nation
(C) in spite of surface appearances to the contrary, the new research findings suggest that the objective value of the potential gain is overridden by the risks
(D) the facts of the situation show that the government is motivated by factors other than objective calculation of the measurable risks and probable benefits
(E) the country’s leaders most likely subjectively perceive the territory as having been taken from their country in the past

Question 2
The question in lines 24-27 functions primarily as

(A) the introduction to a thought experiment whose results the author expects will vary widely among different people
(B) a rhetorical question whose assumed answer is in conflict with the previously accepted view concerning risk-taking behavior
(C) the basis for an illustration of how the previously accepted view concerning risk taking behavior applies accurately to some types of situations
(D) a suggestion that the discrepancies between subjective and objective valuations of possible decision outcomes are more illusive than real
(E) a transitional device to smooth an otherwise abrupt switch from discussion of previous theories to discussion of some previously unaccepted research findings

Question 3
It can most reasonably be inferred from the passage that the author would agree with which one of the following statements?

(A) When states try to regain losses through risky conflict, they generally are misled by inadequate or inaccurate information as to the risks that they run in doing so.
(B) Government decision makers subjectively evaluate the acceptability of risks involving national assets in much the same way that they would evaluate risks involving personal assets.
(C) A new method for predicting and mediating international conflict has emerged from a synthesis of the fields of economics and psychology.
(D) Truly rational decision making is a rare phenomenon in international crises and can, ironically, lead to severe consequences for those who engage in it.
(E) Contrary to previous assumptions, people are more likely to take substantial risks when their subjective assessments of expected benefits match or exceed the objectively measured costs.

Question 4
The passage can be most accurately described as

(A) a psychological analysis of the motives involved in certain types of collective decision making in the presence of conflict
(B) a presentation of a psychological hypothesis which is then subjected to a political test case
(C) a suggestion that psychologists should incorporate the findings of political scientists into their research
(D) an examination of some new psychological considerations regarding risk and their application to another field of inquiry
(E) a summary of two possible avenues for understanding international crises and conflicts

Question 5
The passage most clearly suggests that the author would agree with which one of the following statements?

(A) Researchers have previously been too willing to accept the claims that subjects make about their preferred choices in risk-related decision problems.
(B) There is inadequate research support for the hypothesis that except when a gamble is the only available means for averting an otherwise certain loss, people typically are averse to risk-taking.
(C) It can reasonably be argued that the risk that Britain accepted in its 1982 conflict with Argentina outweighed the potential objectively measurable benefit of that venture.
(D) The new findings suggest that because of the subjective elements involved, governmental strategies concerning risks of loss in international crises will remain incomprehensible to outside observers.
(E) Moderate risks in cases involving unavoidable losses are often taken on the basis of reasoning that diverges markedly from that which was studied in the recent investigations.

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