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Decisions vary. They may vary in both content and complexity. People also vary. An important way that people vary is how much they think. Some prior research investigating thinking and decision making largely conflicts with most traditional decision theories. For example, if considering an array of products to choose from, thinking more about the alternative's attributes should lead to a better decision. However, some research indicates that thinking more may also lead to focusing on irrelevant aspects of the decision and a less optimal outcome. We propose that this conflict in the literature exists because of a failure to consider the interaction between the individual and the decision task. To test this, we used separate methodologies that enhance or attenuate a person's thinking. In Study 1, we selected people who were especially high or low in need for cognition and had them complete a robust decision‐making inventory, which included both complex and simple tasks. In Study 2, we manipulated participant's level of glucose, which acts as the brain's fuel to enhance or attenuate thinking ability. Both studies provide insight for understanding our central tenant that more thought leads to better decisions in complex tasks but does not influence simple decisions. These findings show how the individual's thinking can interact with the constructive elements of the task to shape decision choice. [ABSTRACT FROM AUTHOR]

Older adults have been found to favor positive stimuli over negative stimuli; further, developing a negative preference may be a cognitively demanding process. In the present study, we focused on the joint effects task self‐relevance and cognitive load have on older adults' emotional information preferences when performing decision‐making. To examine this, we used multi‐attribute decision tasks and process‐tracing procedure to measure their searching process. The study composed of a 2 (age: young/old) × 2 (cognitive load: load/non‐load) × 3 (attribute valence: positive/neutral/negative) × 3 (task self‐relevance: high/medium/low) mixed design. Sixty‐one young adults and 62 older adults viewed 5 (alternatives) × 5 (attributes) decision matrices that contained positive, negative, and neutral information, with the total views and mean time spent viewing each different valence (positive, negative, and neutral information) set as dependent variables. The results indicated that both young and old adults have no emotional information preference in regard to self‐relevance. When under no cognitive load, both positive and negative information were viewed more than neutral information; however, under cognitive load, preference for negative information decreased; this effect size was more robust in older adults. There was also a main effect of self‐relevance on total views and mean checking time, with attributes concerning higher self‐relevance tasks being more likely to attract attention. Older adults exhibited a consistent hedonic focus, even in highly self‐relevant contexts; however, this effect disappeared under cognitive load. Overall, the findings suggest that cognitive resources play an important role in emotional information processing during decision processes. [ABSTRACT FROM AUTHOR]

Prescriptions for improving negotiation performance, including developing alternatives to negotiated agreements or setting high aspirations, often fail to consider the inherent uncertainty in such deliberations. Across three studies, this paper demonstrates that negotiators who address this uncertainty by unpacking their positive alternatives and aspirations (e.g., the likelihood of attaining an alternative job offer from Firm #1, Firm #2, or any other firm) judge these outcomes to be more likely to occur and achieve better negotiation outcomes compared with negotiators who consider these same outcomes as a single package (e.g., the likelihood of attaining an alternative job offer from any firm). Unpacking is not uniformly beneficial: unpacking potential negative outcomes (e.g., not receiving another job offer) leads negotiators to demand less in the current negotiation and claim less value as a result. [ABSTRACT FROM AUTHOR]

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Recent papers have demonstrated that the way people acquire information about a decision problem, by experience or by abstract description, can affect their behavior. We examined the role of experience over time in the emergence of the Gambler's Fallacy in binary prediction tasks. Theories of the Gambler's Fallacy and models of binary prediction suggest that recency bias, elicited by experience over time, may play a significant role. An experiment compared a condition where participants sequentially predicted the colored outcomes of a virtual roulette wheel spin with a condition where the wheel's past outcomes were presented all at once. In a third condition outcomes were presented sequentially in an automatic fashion without intervening predictions. Subjects were yoked so that the same history of outcomes was observed in all conditions. The results revealed the Gambler's Fallacy when outcomes were experienced (with or without predictions). However, the Gambler's Fallacy was attenuated when the same outcomes were presented all at once. Observing the Gambler's Fallacy in the third condition suggests that the presentation of information over time is a significant antecedent of the bias. A second experiment demonstrated that, while the bias can emerge with an all-at-once presentation that makes recent outcomes salient (Burns & Corpus, 2004), the bias did not emerge when the presentation did not draw attention to recent outcomes. Copyright © 2009 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Abundant experimental research has documented that incidental primes and emotions are capable of influencing people's judgments and choices. This paper examines whether the influence of such incidental factors is large enough to be observable in the field, by analyzing 682 actual university admission decisions. As predicted, applicants' academic attributes are weighted more heavily on cloudier days and non-academic attributes on sunnier days. The documented effects are of both statistical and practical significance: changes in cloud cover can increase a candidate's predicted probability of admission by an average of up to 11.9%. These results also shed light on the causes behind the long demonstrated unreliability of experts making repeated judgments from the same data. Copyright © 2006 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

In this paper we examined the impact of a specific emotion, guilt, on focusing in decision-making. Through the focusing mechanism, when making decisions, individuals tend to restrict their thoughts to what is explicitly represented in the decisional task, disregarding alternatives. In this paper, three experiments are performed to investigate whether an emotional state of guilt can critically guide individuals' focusing, and even prevailing over the focusing mechanism. Guilty emotional state was induced by asking participants to write about a guilty related life event. The emotional state was thus neither generated by nor related to the tasks used in the experiments. Results of the first two studies show that guilt affects focusing in decision-making in the case of only one explicitly specified option (a positive or a negative one). Guilty participants, when presented with a stated option that has predominantly positive characteristics, prefer other, unspecified options over the positive one. Guilty participants faced with a stated option that has predominantly negative features tend to prefer it to other, unspecified, options, instead. Finally, experiment 3 shows that guilty participants presented with two different options (a negative vs. a positive one) having different degrees of explicitness (i.e. they are not equally represented in the decision frame), focus on the negative option, even though the latter was not explicitly represented but only hinted at the end of the text. Overall, these results suggest that guilt emotion state can play a crucial role in either strengthening or reducing the focusing mechanism. Copyright © 2006 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Foregone payoffs add information about the outcomes for alternatives that are not chosen. The present paper examines the effect of foregone payoffs on underweighting rare but possible events in repeated choice tasks. Previous studies have not demonstrated any long-lasting effects of foregone payoffs (following repeated presentation of a task) when foregone payoffs do not add much information. The present paper highlights the conditions and the contributing factors for the occurrence of such long-lasting effects. An experimental study compares the effect of foregone payoffs under different degrees of rarity of the negative payoff. It is demonstrated that foregone payoffs increase the selection from risky alternatives with extremely rare and highly negative outcomes, and that this effect does not diminish with repeated presentation of the task. These findings can be summarized using a surprisingly simple reinforcement-learning model. The findings are discussed in the context of the potential long-term effect of social learning. Copyright © 2006 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This paper argues that a violation of the independence condition, used by von Neumann and Morgenstern to characterize expected utility maximization, will always lead to the existence of choice situations in which information-aversion is exhibited. [ABSTRACT FROM AUTHOR]

Deals with various criticisms about the "Journal of Behavioral Decision Making." Need for a new journal; Encouragement of isolation from mainstream disciplines; Inherent disadvantages of a multidisciplinary journal.

People's risky decisions are susceptible to the social context in which they take place. Across three experiments using different paradigms, we investigated the influence of three social factors upon participants' decisions: the recipient of the decision‐making outcome (self, other, or joint), the nature of the relationship with the other agent (friend, stranger, or teammate), and the type of information that participants received about others' preferences: none at all, general information about how previous participants had decided, or information about a specific partner's preference. We found that participants' decisions about risk did not differ according to whether the outcome at stake was their own, another agent's, or a joint outcome, nor according to the type of information available. Participants did, however, adjust their preferences for risky options in light of social information. Highlights: We extend the literature on how social context influences decisions about risk.Risky decision making did not generally differ according to who the recipient was.Participants adjusted their risky choices in light of social information. [ABSTRACT FROM AUTHOR]

After making decisions, we often get feedback concerning forgone outcomes (what would have happened had we chosen differently). Yet, many times, our exposure to such feedback is systematically biased. For example, your friends are more likely to tell you about a party you missed if it was fun than if it was boring. Despite its prevalence, the effects of biased exposure to forgone outcomes on future choice have not been directly studied. In three studies (five experiments) using a simplified learning task, we study the basic influence of biased exposure to forgone outcomes in the extreme case in which decision makers can easily infer the missing information such that the biased exposure carries almost no informational value. The results in all studies suggest that nevertheless, the biased exposure to forgone outcomes affected choice. Exposure to forgone outcomes only when they were better than the obtained outcomes (Only‐Better‐Forgone) increased selections of the forgone option compared with exposure to forgone outcomes only when they were worse than the obtained outcome (Only‐Worse‐Forgone). Moreover, relative to an unbiased exposure to all forgone outcomes, the effect of exposure to Only‐Worse‐Forgone was larger than the effect of exposure to Only‐Better‐Forgone feedback. However, these effects were not universal: In environments that include rare negative events ("disasters"), biased exposure to forgone outcomes had very little effect. We raise potential explanations and further discuss implications for marketing and risk awareness. [ABSTRACT FROM AUTHOR]

Discounting is a useful framework for understanding temporal choices. A person who prefers $50 immediately over $100 in 1 month exhibits a higher discount rate than a person deciding to wait for the higher payoff. Although previous research shows that discount rates are domain‐specific, we propose an alternative to the domain specificity account. We suggest that differences in discounting alternatives across various domains may result not so much from the domains' nature per se but from differences in perceived attractiveness of the discounted alternatives. We replicated that an illustrative study evidencing domain specificity in discounting (Experiment 1) showed that people's subjective values of the payoffs in domains discounted in this experiment were different (Experiment 2) and used a novel method to match the attractiveness of the available alternatives across domains (Experiment 3). Finally, Experiment 4 showed that when matching was applied, the domain effect disappeared. We conclude that a magnitude effect can, at least partially, explain domain specificity in delay discounting. [ABSTRACT FROM AUTHOR]

We examined how individuals and groups behave in making judgmental forecasts when they are given external forecast advice. We compare individual and group advice‐taking behavior under different conditions: (a) when advice quality is fixed, (b) when advice quality is randomly varied, and (c) when there is feedback on advice quality or not. Participants in Study 1 received fixed advice of either reasonable or unreasonable quality while making their decisions. Participants in Study 2 randomly received both reasonable and unreasonable advice. We found in both studies that groups feel more confident than individuals. This greater confidence decreased the groups' reliance on advice. We also found that groups are better than individuals at discerning the quality of advice. In the group treatment, the group's reliance on advice increased according to the degree of disagreement with the initial decisions of the group members. In Study 3, participants randomly received both reasonable and unreasonable advice, and in addition, they received feedback on actual realizations that enabled them to learn about the quality of advice. In the presence of feedback on random advice quality, groups are no longer less receptive to advice than individuals; with feedback, both individuals and groups discount advice more than they do without feedback. Nevertheless, groups are still better than individuals at discerning the quality of advice. We conclude that group forecasting is better than individual forecasting across various conditions that we investigate except when advice quality is known to be consistently reliable. [ABSTRACT FROM AUTHOR]

Previous studies show that decision makers (DMs) lie more to avoid a loss than achieve a gain. Two compelling mechanisms might explain this observation. One assumes that lying is a risky activity and relates to the shape of the monetary value function described by prospect theory, which assumes (a) increased risk taking for loss frames and (b) an asymmetry between the perceived values of losses and gains. The other relates to the importance of self‐esteem functions as expressed in self‐concept maintenance models, self‐esteem issues being weighed against monetary issues. This alternative explanation assumes that a loss frame serves as a factor lowering moral considerations. We report an experimental study presenting sets of lotteries to DMs, once in a moral context and once in a traditional probabilistic context. The results show that DMs take less risk when lotteries are presented in a moral context. It is also shown that DMs take more risk for losses than gains, this holding for both the moral and probabilistic contexts. This latter result suggests that loss/gain asymmetry can be completely explained by prospect theory factors, and framing makes no difference to the valuing of moral considerations. [ABSTRACT FROM AUTHOR]

Economic decisions usually involve high stakes, real consequences, and some degree of personal risk. This article explores the impact of motivational and volitional states on economic decision processes in an incentivized lottery choice task. We investigated the patterns of decision time, choice, information search, and pupil dilation dependent on an experimental manipulation of motivation and volition, that is, the deliberative and the implemental mindset. The results indicated that choice preferences in economic decisions were robust and remained unaffected by motivational and volitional states, but decision processes were notably impacted. Decision makers in a deliberative state of mind searched for information more extensively and made slower decisions than the baseline. The implemental mindset was associated with more attention paid to the probability attributes of the gambles relative to the deliberative mindset. Furthermore, we observed that gamble outcomes that entailed no win at all (i.e., zero outcomes) played an important role for information search. These outcomes were largely disregarded in terms of predecisional information search but elicited pupillary responses similar to very high outcome lotteries. These results inform the current debate about the zero effect in risky choice. We also discuss the potential of eye‐tracking studies of risky choice to dissolve ambiguities concerning the contributions of effort and arousal to modulating pupillary response. Implications for theoretical advances in decision research are discussed. [ABSTRACT FROM AUTHOR]

Decision‐making researchers purport that a novel cognitive ability construct, cognitive reflection, explains variance in intuitive thinking processes that traditional mental ability constructs do not. However, researchers have questioned the validity of the primary measure because of poor construct conceptualization and lack of validity studies. Prior studies have not adequately aligned the analytical techniques with the theoretical basis of the construct, dual‐processing theory of reasoning. The present study assessed the validity of inferences drawn from the cognitive reflection test (CRT) scores. We analyzed response processes with an item response tree model, a method that aligns with the dual‐processing theory in order to interpret CRT scores. Findings indicate that the intuitive and reflective factors that the test purportedly measures were indistinguishable. Exploratory, post hoc analyses demonstrate that CRT scores are most likely capturing mental abilities. We suggest that future researchers recognize and distinguish between individual differences in cognitive abilities and cognitive processes. [ABSTRACT FROM AUTHOR]

The study of cognitive processes is built on a close mapping between three components: overt gaze behavior, overt choice, and covert processes. To validate this overt–covert mapping in the domain of decision‐making, we collected eye‐movement data during decisions between risky gamble problems. Applying a forward inference paradigm, participants were instructed to use specific decision strategies to solve those gamble problems (maximizing expected values or applying different choice heuristics) during which gaze behavior was recorded. We revealed differences between overt behavior, as indicated by eye movements, and covert decision processes, instructed by the experimenter. However, our results show that the overt–covert mapping is for some eye‐movement measures not as close as expected by current decision theory, and hence question reverse inference as being prone to fallacies due to a violation of its prerequisite, that is, a close overt–covert mapping. We propose a framework to rehabilitate reverse inference. [ABSTRACT FROM AUTHOR]

Recent neuroendocrinology research has pointed out that testosterone (T) and cortisol (C) changes after social interactions can predict risk‐taking behavior in decision‐making, depending on the sex of participants. However, previous research has focused on the effects of the changes in only one hormone, rather than the interaction between them, even though C can suppress T activity. Our aim was to test, in men and women, the role of T changes moderated by C changes after competition in decision‐making. Thus, 48 males and 46 females completed the Iowa Gambling Task (IGT) after a laboratory competition or a noncompetitive task (control task). Saliva samples were collected before and after the competition/control task. IGT was employed to measure risk‐taking decision‐making, considering the degree of uncertainty. Our results showed sex‐differentiated effects of T and C changes on risk‐taking behavior. On the one hand, men from both task groups (Competition/Control) who had higher C and T changes after competition showed more risk‐taking decision‐making (higher IG Risk). On the other hand, women from the competitive task who had high C and T showed conservative decision‐making. Therefore, these results show sex‐differentiated decision‐making profiles, which would help to understand how men and women behave after experiencing a competitive social context. [ABSTRACT FROM AUTHOR]

Prior research has asserted that emotions affect anchoring bias in decision making through the emotion's certainty appraisal or through the emotion's action tendencies, but these prior studies investigate the role of each component—appraisal or action tendency—without accounting for potential effects of the other one. The current research investigates whether anger exerts a significant effect on anchoring bias by activating a desire to confront a potential anchor. Importantly, the studies compare the effect of anger versus disgust, emotions that differ in their action tendency but are similar in their certainty appraisal. In Study 1, participants completed an emotion induction task and then a negotiation task where the first offer from the negotiation partner served as a potential anchor. Anger led to more deviation from the anchor compared with disgust or neutral feelings. Subsequent studies provide evidence that the angry participants are less anchored when the anchor value comes from a more confrontable source (someone else vs. themselves in Study 2 and an out‐group member vs. an in‐group member in Study 3). [ABSTRACT FROM AUTHOR]

The study of multi‐cue judgment investigates how decision makers aggregate cues to predict the value of a criterion variable. We consider a multi‐cue judgment task in which decision makers have prior knowledge of inter‐cue relationships but are ignorant of how the cues correlate with the criterion. In this setting, a naive judgment strategy prescribes weighting the cues equally. Although many participants are well described via an equal weighting scheme, we find that a substantial minority of participants make predictions consistent with a weighting scheme based on a low‐dimensional projection of the cue space that optimally takes into account inter‐cue correlations. The use of such a weighting scheme is consistent with minimizing maximal error in prediction when the cue‐criterion relationships are unknown. [ABSTRACT FROM AUTHOR]

Decisions under risk in the medical domain have been found to systematically diverge from decisions in the monetary domain. When making choices between monetary options, people commonly rely on a decision strategy that trades off outcomes with their probabilities; when making choices between medical options, people tend to neglect probability information. In two experimental studies, we tested to what extent differences between medical and monetary decisions also emerge when the decision outcomes affect another person. Using a risky choice paradigm for medical and monetary decisions, we compared hypothetical decisions that participants made for themselves to decisions for a socially distant other (Study 1) and to recommendations as financial advisor or doctor (Study 2). In addition, we examined people's information search in a condition in which information about payoff distributions had to be learned from experiential sampling. Formal modeling and analyses of search behavior revealed a similarly pronounced gap between medical and monetary decisions in decisions for others as in decisions for oneself. Our results suggest that when making medical decisions, people try to avoid the worst outcome while neglecting its probability—even when the outcomes affect others rather than themselves. [ABSTRACT FROM AUTHOR]

The principle of 'divide and conquer' (DAC) suggests that complex decision problems should be decomposed into smaller, more manageable parts, and that these parts should be logically aggregated to derive an overall value for each alternative. Decompositional procedures have been contrasted with holistic evaluations that require decision makers to simultaneously consider all the relevant attributes of the alternatives under consideration (Fischer. 1977). One area where decompositional procedures have a clear advantage over holistic procedures is in the reduction of random error (Ravinder, 1992; Ravinder and Kleinmuntz, 1991; Kleinmuntz, 1990). Adopting the framework originally developed by Ravinder and colleagues, this paper details the results of a study of the random error variances associated with another popular multi-criteria decision making technique, the Analytic Hierarchy Process (AHP); (Saaty. 1977. 1980), as well as the random error variances of a holistic version of the Analytic Hierarchy Process (Jensen. 1983). In addition, data concerning various psychometric properties (e.g. the convergent validity and temporal stability) and values of AHP inconsistency are reported for both the decompositional and holistic evaluations. The results of the study show that the Ravinder and Kleinmuntz (1991) error-propagation framework extends to the AHP and decompositional AHP judgments are more consistent than their holistic counterparts. [ABSTRACT FROM AUTHOR]

ABSTRACT Whether buying stocks or playing the slots, people making real-world risky decisions often rely on their experiences with the risks and rewards. These decisions, however, do not occur in isolation but are embedded in a rich context of other decisions, outcomes, and experiences. In this paper, we systematically evaluate how the local context of other rewarding outcomes alters risk preferences. Through a series of four experiments on decisions from experience, we provide evidence for an extreme-outcome rule, whereby people overweight the most extreme outcomes (highest and lowest) in a given context. As a result, people should be more risk seeking for gains than losses, even with equally likely outcomes. Across the experiments, the decision context was varied so that the same outcomes served as the high extreme, low extreme, or neither. As predicted, people were more risk seeking for relative gains, but only when the risky option potentially led to the high-extreme outcome. Similarly, people were more risk averse for relative losses, but only when the risky option potentially led to the low-extreme outcome. We conclude that in risky decisions from experience, the biggest wins and the biggest losses seem to matter more than they should. Copyright © 2013 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

ABSTRACT The decision whether to explore new alternatives or to choose from familiar ones is implicit in many of our daily activities. How is this decision made? When will deviation from optimal exploration be observed? The current paper examines exploration decisions in the context of a multi-alternative 'decisions from experience' task. In each trial, participants could choose a familiar option (the status quo) or a new alternative (risky exploration). The observed exploration rates were more sensitive to the frequent outcome from choosing new alternatives than to the average outcome. That is, the implicit decision whether to explore a new alternative reflects underweighting of rare events: Over-exploration was documented in 'Rare Disasters' environments, and insufficient exploration was evident in 'Rare Treasures' environments. In addition, the results reveal a decrease in exploration of new alternatives over time even when it is always optimal and some exploration even when it is never reinforcing. These results can be captured with models that share a distinction between 'data collection' and 'outcome-driven' decision modes. Under the data collection mode, the decision maker collects information about the environment, to be used in future choices. Under the outcome-driven mode, the decision maker relies on small samples of previous experiences with familiar versus unfamiliar alternatives, before the selection of a specific alternative. The predictive value of a two-parameter 'explorative sampler' quantification of these assumptions is demonstrated. Copyright © 2013 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

ABSTRACT For many decisions we make, we are more likely to receive feedback about some outcomes than about others, and thus we must operate under conditions of asymmetric partial feedback. In this paper, we examine the effects of asymmetric partial feedback on decision making across three experiments. Experiment 1 examines the effects of four partial feedback schedules on decision making in a single-attribute auditory detection task. Experiment 2 examines these same schedules in the context of a simulated experiment in which virtual participants perform a multi-attribute choice task. Experiment 3 then examines effects of one partial feedback schedule representative of a real-world decision-making domain (personnel selection) using an ecologically informed multi-attribute choice task. All three experiments reveal that asymmetric partial feedback primarily impacts on response-bias, a parameter of signal detection theory. These findings can be explained in terms of decision makers' attempts to maximize accuracy and the fact that shifts in response-bias will, under partial feedback, produce misleading impressions of greater accuracy. Copyright © 2013 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

ABSTRACT One of the most common findings in behavioral decision research is that people have unrealistic beliefs about how much they know. However, demonstrating that misplaced confidence exists does not necessarily mean that there are costs to it. This paper contrasts two approaches toward answering whether misplaced confidence is good or bad, which we have labeled the overconfidence and unjustified confidence approach. We first consider conceptual and analytic issues distinguishing these approaches. Then, we provide findings from a set of simulations designed to determine when the approaches produce different conclusions across a range of possible confidence-knowledge-outcome relationships. Finally, we illustrate the main findings from the simulations with three empirical examples drawn from our own data. We conclude that the unjustified confidence approach is typically the preferred approach, both because it is appropriate for testing a larger set of psychological mechanisms as well as for methodological reasons. Copyright © 2013 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

ABSTRACT Rubinstein and Leland have both demonstrated that many observed violations of expected and discounted utility can be explained if people employ similarity judgments to make choices. In this paper, I show that this decision process also explains which equilibria will be selected in single-shot games with multiple equilibria and implies that play in games will be associated with anomalies in risky choice. Data supporting these predictions are presented. Copyright © 2012 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Presents a response to commentaries on an article which offered a defense for independence axiom in decision making. Value of information; Choice and preferences in non-information-aversion.

ABSTRACT In this paper, we examine the role of personal agency as a key antecedent of regret that individuals experience when the outcome of their decision is unfavorable. In contrast to previous research that documents its exacerbating role, we find that personal agency mitigates regret under certain circumstances. A series of experimental studies show that personal responsibility for the decision may attenuate subjective perceptions of the extent of failure and mitigate regret. However, when the superior outcome of the foregone option is known and the failure of the chosen option is irreversible, personal agency may amplify regret. We also find that subjective failure perceptions mediate the relationship between personal agency and regret levels. Copyright © 2012 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

ABSTRACT Research has demonstrated that individual differences in numeracy may have important consequences for decision making. In the present paper, we develop a shorter, psychometrically improved measure of numeracy-the ability to understand, manipulate, and use numerical information, including probabilities. Across two large independent samples that varied widely in age and educational level, participants completed 18 items from existing numeracy measures. In Study 1, we conducted a Rasch analysis on the item pool and created an eight-item numeracy scale that assesses a broader range of difficulty than previous scales. In Study 2, we replicated this eight-item scale in a separate Rasch analysis using data from an independent sample. We also found that the new Rasch-based numeracy scale, compared with previous measures, could predict decision-making preferences obtained in past studies, supporting its predictive validity. In Study, 3, we further established the predictive validity of the Rasch-based numeracy scale. Specifically, we examined the associations between numeracy and risk judgments, compared with previous scales. Overall, we found that the Rasch-based scale was a better linear predictor of risk judgments than prior measures. Moreover, this study is the first to present the psychometric properties of several popular numeracy measures across a diverse sample of ages and educational level. We discuss the usefulness and the advantages of the new scale, which we feel can be used in a wide range of subject populations, allowing for a more clear understanding of how numeracy is associated with decision processes. Copyright © 2012 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

ABSTRACT This study manipulated the graphical representation of options by framing the physical characters in figures and found that preferences could be affected even when the words and numbers of the problem were constant. Based on attribute substitution theory and an equate-to-differentiate approach, we proposed a two-process model of graph-framing effects. In the first mental process, the graph-editing process, the physical features (e.g., distance, size) represented in the graph are visually edited, and the perceived numerical difference between the options is judged based on its physical features. The second mental process, the preferential choice process, occurs by an equate-to-differentiate approach in which people seek to equate the difference between options on the dimension on which the difference is smaller, thus leaving the greater other-dimensional difference to be the determinant of the final choice. Four experiments were tested for graph-framing effects. Experiment 1 found a graph-framing effect in coordinate graphs resting on the (de)compression of the scales employed in the figures. Experiment 2 revealed additional graph-framing effects in other question scenarios and showed that preference changes were mediated by perceived numerical distances. Experiment 3 further confirmed the presence of graph-framing effects in sector graphs similar to those found in coordinate ones. Experiment 4 suggested that such graph-framing effects could be eliminated when logical processing (e.g., introducing a mathematical operation before a choice task) was encouraged. This paper discusses related research and a possible substrate basis for graph-framing effects. Copyright © 2011 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

ABSTRACT Recent research using late adolescent (18-19 years) and adult samples suggests that within-subject performance on a variety of standard, controlled laboratory tasks reflects a higher-order positive manifold of decision-making competence. The present paper extends this important work by testing whether preadolescent children (10- to 11-year-olds, n = 101) exhibit a similar structural pattern characterizing their decision-making performance. Performance on 'child-friendly' versions of framing problems, decision matrices, consistency in risk perceptions, and calibration of confidence conformed to a one-factor solution, comparable with that previously found with older populations. Further, individual differences in effortful control, a temperament dimension related to self-regulative executive function, was significantly associated with decision-making competence. Importantly, these measures were predictive of both positive (e.g., completing set goals) and negative behaviors (e.g., missing homework assignments). Results are discussed in terms of the existence of early stable patterns of decision making and rationality and the emergence of systematic individual difference factors in decision making. Copyright © 2011 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

ABSTRACT Although previous studies investigated the relationship between general cognitive abilities and decision making, few have characterized specific cognitive abilities underlying decision-making competence. In this paper, we focus on executive functions-control processes involved in the regulation of cognition. Specifically, we report on an individual-differences study that investigated the relationship of executive functioning (EF) and general cognitive abilities (fluid intelligence and numeracy) with different aspects of decision-making competence. Individual differences in EF components explained aspects of decision-making competence even after controlling for fluid intelligence and numeracy. However, different aspects of decision-making competence varied in the extent to which they relied on different executive functions. In particular, resistance to framing effects, the ability to apply decision rules, and successful engagement in cognitive reflection partially depend on individual differences on the monitoring/inhibition dimension of EF. The ability to provide consistent judgments in risk perception is related to the shifting aspect of EF. The ability to recognize social norms and resistance to sunk costs were not significantly related to EF, thus supporting the idea that executive control is not a major determinant of these aspects of decision-making competence. Finally, substantial variance in some of the decision-making tasks remained unexplained, suggesting that other cognitive or non-cognitive abilities need to be considered in future studies. Copyright © 2011 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Standard choice theory assumes choice to be independent of the point of reference. Based on a number of studies which challenge this assumption. Tversky and Kahneman have proposed a reference-dependent model which captures the influence of reference points on individual choice. If choice is reference-dependent, switching the reference point so that it is first dominated by x and then by y increases the likelihood of choosing y. Switching the location of an asymmetrically dominated reference point without altering the dominance relationship should also influence reference-dependent choice in a predicted manner. In this paper the reference-dependent model is tested in two experiments which focus on asymmetrically dominated reference points. The results of these experiments give further confirmation to the reference-dependent model. [ABSTRACT FROM AUTHOR]

In this paper the Brunswikian framework provided by the theory of Probabilistic Mental Models (PMM), and other theoretical stances inspired by probabilistic functionalism, is combined with the Thurstonian notion of a stochastic component of judgment. We review data from 25 tasks with representative selection of items collected in our laboratory. Over/underconfidence is close to zero in most domains, but there is a moderate hard-easy effect across task domains that is inconsistent with the original assumptions of the Brunswikian framework. The binomial model modifies PMM-theory by allowing for sampling error in the process of learning the ecological probabilities and the response-error model takes error in the process of overt probability assessment into account. Both models predict a moderate hard-easy effect across task environments that differ in difficulty or predictability, but it is also demonstrated that the two interpretations of random error lead to different predictions. The response error model predicts format dependence, with more overconfidence in full-range than in half-range assessment, and the phenomenon is illustrated with empirical data. It is proposed that a model that combines the Brunswikiati fratnework with both sampling error and response error captures many of the important phenomena in the calibration literature. For illustrative purposes, a combined model with four parameters is fitted to empirical data suggesting good fit. [ABSTRACT FROM AUTHOR]

This paper discusses differences between prospect theory and cumulative prospect theory. It shows that cumulative prospect theory is not merely a formal correction of some theoretical problems in prospect theory, but it also gives different predictions. Some experiments by Lola Lopes are re-analyzed, and are demonstrated to favor cumulative prospect theory over prospect theory. It turns out that the mathematical form of cumulative prospect theory is well suited for modeling the psychological phenomenon of diminishing sensitivity. [ABSTRACT FROM AUTHOR]

This paper examines two dimensions of concurrent verbal protocol validity. First, whether verbalization affects process and outcome (reactivity) was examined by comparing concurrent verbal protocol traces with those from a computer search process tracing method, the latter being a complete trace of information acquisition from experimental materials. Earlier findings that verbalization affects time were confirmed. However, verbalization did not affect amount and pattern of acquisition or accuracy of judgments. Second, whether concurrent verbal protocols are complete was examined by comparing concurrent verbal protocol and computer traces that were simultaneously obtained in a treatment in which subjects verbalized as they acquired information from the computer. The verbal traces less completely captured information acquisition behavior than computer search. This suggests that, although concurrent verbal protocols provide greater insight into decision behavior than computer search, the latter is a more reliable information-acquisition trace. Thus, if information acquisition is of primary interest and if computer search activities can be naturally integrated into performing the primary task, computer search is preferred to concurrent verbal protocols. However, if information use or retrieval from long-term memory is of primary interest, concurrent verbal protocols are preferred to computer search. Finally, this paper examined whether the simultaneous use of concurrent verbal protocols and computer search provides traces of information acquisition and use that are as complete as when each method is independently applied. Although computer search tended to limit subjects' verbalizations of evaluative operators, this effect may be eliminated by practice on the computer prior to collecting data. [ABSTRACT FROM AUTHOR]

This paper reports the results of two experiments to investigate the effects of payoff alterations in two-person symmetric games. The initial experiment involved 60 subjects, each of whom could earn from £0 to £15, depending on the interaction of their decisions and the unknown decisions of one other person. All decisions were made without feedback to isolate the impact on subjects' behaviour of the game's parameters. A primary aim was to see if the games had strategically distinct structures, or whether uncertainty over the choice rule of others would influence choice behaviour and lessen this independence. An alternative model of rational choice, making allowance for uncertainty in the decision environment, was proposed to capture subjects' behaviour. The results indicated that the frontiers of most of the games had no impact on choice behaviour other than through the magnitude of the change in payoffs. The model received strong support across an identifiable set of 'frontierless' games. However, the variety of games was not sufficient to provide a comprehensive test. A second experiment was recently held to close these gaps. Fifty subjects took part, each of whom earned from A$0 to A$24, averaging A$17. The findings provided broad additional support for the theory. [ABSTRACT FROM AUTHOR]

Of all of the new technologies emerging in the late 20th century, the production of artificial intelligence may provide the most profound impacts on organizational decision making. Because the development of artificial intelligence technologies and models has largely been based on psychological models of human cognition, the effects of their implementation in complex social settings have not been thoroughly examined. This paper is an attempt to generate research which will develop a comprehensive understanding of the impacts of artificial intelligence and its role in complex organizations. A set of 11 hypotheses has been developed which examine the relationships between artificial intelligence technologies and the dimensions of organizational decision making. It is argued here that the implementation of expert systems will lead to less complex and political decision processes, while the implementation of natural language systems will lead to more complex and political decision processes. [ABSTRACT FROM AUTHOR]

This paper reports on experiments which test whether factors such as regret or disappointment influence taxpayer compliance decisions. Previous tests of regret and disappointment theory have been based upon the common-ratio effect in which probabilities vary while outcomes are held fixed. In contrast, our experiments involved trials in which the outcomes were allowed to vary. Previous tests had mainly found evidence of regret effects and to a lesser extent were supportive of disappointment. In contrast, we were able to reject simple theories of both regret and disappointment. A second experiment produced evidence which indicates that whether or not rejected risky alternatives are resolved has no significant influence on subjects' choices. One would expect that regret could only occur when a subject learns the outcome of a non-chosen option. Hence this result can be seen as evidence against regret theory. We shall argue that there is a possible interpretation of regret theory which is compatible with this result. [ABSTRACT FROM AUTHOR]

ABSTRACT The present paper explores the effect of the salience of collective consequences of opportunistic behavior in commons and anticommons dilemmas. Making this type of externalities salient was expected to increase the awareness of the conflict between collective and personal interests, especially in the anticommons dilemma. The results of a vignette study (Study 1, N = 100) and a laboratory experiment (Study 2, N = 55) confirmed our hypotheses, revealing more opportunistic behavior in the anticommons than in the commons dilemma when externalities were not made salient, while no significant dilemma effect was obtained when the externalities were made salient. Moreover, the results of Study 2 demonstrated that the dilemma effect on cooperation was mediated by externalities awareness. The positive effects of increments in externalities awareness on cooperation are discussed. Copyright © 2011 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Analyses of multi-attribute decision problems are dominated by accounts which assume people select from a repertoire of cognitive strategies to make decisions. This paper explores an alternative account based on sequential sampling and evidence accumulation. Two experiments varied aspects of a decision environment to examine competing models of decision behavior. The results highlighted the intra-participant consistency but inter-participant differences in the amount of evidence considered in decisions. This pattern was best captured by a sequential evidence accumulation model (SEQ) which treated pure Take-The-Best (TTB) and pure 'rational' (RAT) models as special cases of a single model. The SEQ model was also preferred by the minimum description length (MDL) criterion to a naive strategy-selection model (NSS) which assumed that TTB or RAT could be selected with some probability for each decision. Copyright © 2010 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Decision makers often make snap judgments using fast-and-frugal decision rules called cognitive heuristics. Research into cognitive heuristics has been divided into two camps. One camp has emphasized the limitations and biases produced by the heuristics; another has focused on the accuracy of heuristics and their ecological validity. In this paper we investigate a heuristic proposed by the first camp, using the methods of the second. We investigate a subset of the representativeness heuristic we call the 'similarity' heuristic, whereby decision makers who use it judge the likelihood that an instance is a member of one category rather than another by the degree to which it is similar to others in that category. We provide a mathematical model of the heuristic and test it experimentally in a trinomial environment. In this environment, the similarity heuristic turns out to be a reliable and accurate choice rule and both choice and response time data suggest it is also how choices are made. We conclude with a theoretical discussion of how our work fits in the broader 'fast-and-frugal' heuristics program, and of the boundary conditions for the similarity heuristic. Copyright © 2009 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Erev, Ert, and Roth organized three choice prediction competitions focused on three related choice tasks: One shot decisions from description (decisions under risk), one shot decisions from experience, and repeated decisions from experience. Each competition was based on two experimental datasets: An estimation dataset, and a competition dataset. The studies that generated the two datasets used the same methods and subject pool, and examined decision problems randomly selected from the same distribution. After collecting the experimental data to be used for estimation, the organizers posted them on the Web, together with their fit with several baseline models, and challenged other researchers to compete to predict the results of the second (competition) set of experimental sessions. Fourteen teams responded to the challenge: The last seven authors of this paper are members of the winning teams. The results highlight the robustness of the difference between decisions from description and decisions from experience. The best predictions of decisions from descriptions were obtained with a stochastic variant of prospect theory assuming that the sensitivity to the weighted values decreases with the distance between the cumulative payoff functions. The best predictions of decisions from experience were obtained with models that assume reliance on small samples. Merits and limitations of the competition method are discussed. Copyright © 2009 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

The conjunction fallacy occurs when people judge a conjunctive statement B-and-A to be more probable than a constituent B, in contrast to the law of probability that P(B ∧ A) cannot exceed P(B) or P(A). Researchers see this fallacy as demonstrating that people do not follow probability theory when judging conjunctive probability. This paper shows that the conjunction fallacy can be explained by the standard probability theory equation for conjunction if we assume random variation in the constituent probabilities used in that equation. The mathematical structure of this equation is such that random variation will be most likely to produce the fallacy when one constituent has high probability and the other low, when there is positive conditional support between the constituents, when there are two rather than three constituents, and when people rank probabilities rather than give numerical estimates. The conjunction fallacy has been found to occur most frequently in exactly these situations. Copyright © 2008 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

The conjunction fallacy occurs when people judge a conjunction B-and-A as more probable than a constituent B, contrary to probability theory's ‘conjunction rule’ that a conjunction cannot be more probable than either constituent. Many studies have demonstrated this fallacy in people's reasoning about various experimental materials. Gigerenzer objects that from a ‘frequentist’ standpoint probability theory is not valid for these materials, and so failure to follow the conjunction rule is not a fallacy. This paper describes three experiments showing that the conjunction fallacy occurs as consistently for conjunctions where frequentist probability theory is valid (conjunctions of everyday weather events) as for other conjunctions. These experiments also demonstrate a reliable correlation between the occurrence of the conjunction fallacy and the disjunction fallacy (which arises when a disjunction B-or-A is judged less probable than a constituent B). This supports a probability theory + random variation account of probabilistic reasoning. Copyright © 2008 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Identifying discrepancies between normative prescriptions and actual behavior constitutes an important facet of studying judgment and decision making. Notwithstanding, alleged normative violations should be submitted to the most stringent tests before their existence is recognized. The present paper centers on participants' understanding of instructions and comprehension of the experimental task. As an example, we examine the “uncertainty effect” which, supposedly, violates canonical requirements of the theory of rational choice. Following this effect, people often value a lottery less than its worst possible realization, due to the uncertainty associated with the lottery. We empirically demonstrate that Gneezy et al.'s instructions were ambiguous. We show that only participants who miscomprehended the instructions exhibited a response pattern consistent with the uncertainty effect. Removing the ambiguity results in the elimination of the effect. Broader implications for the judgment and decision making literature are briefly discussed. Copyright © 2008 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This paper investigates the origins of a widespread decision bias in betting markets, the favorite-longshot bias (FLB); in particular, whether it is caused by cognitive errors on the part of bettors or by the pricing policies of bookmakers. The methodology is based on previous literature, which has suggested that: (i) races, as decision tasks for bettors, can be distinguished by their degree of complexity and their attractiveness to those with access to privileged information (insiders), (ii) cognitive errors increase as complexity increases, and (iii) bookmakers set odds in a manner to protect themselves from insiders. The degree of FLB was examined in races of varying complexity and attractiveness to insiders using a dataset of 8545 races drawn from the parallel bookmaker and pari-mutuel markets operating in the UK in 2004. The results, interpreted in the light of the cognitive error and complexity literature, suggest that neither bettors' nor bookmakers' cognitive errors are the main cause of the bias. Rather, bettors' preferences for risk and the deliberate pricing policies of bookmakers play key roles in influencing the bias in markets where bookmakers and pari-mutuel operators coexist. Copyright © 2008 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Social norms play an important role in individual decision making. We argue that two different expectations influence our choice to obey a norm: what we expect others to do (empirical expectations) and what we believe others think we ought to do (normative expectations). Little is known about the relative importance of these two types of expectation in individuals' decisions, an issue that is particularly important when normative and empirical expectations are in conflict (e.g., systemic corruption, high crime cities). In this paper, we report data from Dictator game experiments where we exogenously manipulate dictators' expectations in the direction of either selfishness or fairness. When normative and empirical expectations are in conflict, we find that empirical expectations about other dictators' choices significantly predict a dictator's own choice. However, dictators' expectations regarding what other dictators think ought to be done do not have a significant impact on their decisions after controlling for empirical expectations. Our findings about the crucial influence of empirical expectations are important for designing institutions or policies aimed at discouraging undesirable behavior. Copyright © 2008 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]