Surprise in Decision Making Under Uncertainty (original) (raw)
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Running head : Surprise in Decision Making SURPRISE IN DECISION MAKING UNDER UNCERTAINTY
1999
In four experiments we investigate overand underweighting of probabilities in decisions under risk. To account for this phenomenon we propose a view of the probab ility weighting function as a composite of cognitive and emotional processes and suggest that there is no single weighting function but two separate weighting functions for each process. Data obtained from a rating as well as three choice experiments, using both between and within subjects designs, generally support the proposed view. Given this broader perspective, cognitive "biases" or "errors" may turn out as highly intelligent solutions to maximize utility. * Dr. Eduard Brandstätter, Dept. of Social and Economic Psychology, University of Linz, A-4040 Linz, Austria. Phone: 0043-732-2468-578, Fax: 0043-732-2468-9315. E-mail: e.brandstaetter@jk.uni-linz.ac.at ** Dr.Anton Kühberger, Dept. of Psychology, University of Salzburg, A-5020 Salzburg, Austria. Phone: 0043-662-8044-5112, Fax: 0043-662-8044-5126....
Making decision under uncertainty emotions, risk and biases
The difficulty in deciding and facing up to uncertainty is not only linked to the inadequacy of the architecture of our minds but also to an ‘external’ model of uncertainty which does not correspond to the way in which our mind naturally functions. New conceptual paradigms and new programmes for experimental research are called for in order to redefine the role of internal and external restric- tions on human action (resources and available information, limitations on calcula- tion ability, on the capacity of memory, cognitive styles, gender differences and so on). All this should be contemplated in a more general theoretical framework – natural logic – based not on metaphysical assumptions but on the concrete evi- dence provided by cognitive neurosciences.
How Affect Shapes Risky Choice: Distorted Probability Weighting Versus Probability Neglect
Journal of Behavioral Decision Making, 2015
People's choices between prospects with relatively affect-rich outcomes (e.g., medical side effects) can diverge markedly from their choices between prospects with relatively affect-poor outcomes (e.g., monetary losses). We investigate the cognitive mechanisms underlying this "affect gap" in risky choice. One possibility is that affect-rich prospects give rise to more distortion in probability weighting. Another is that they lead to the neglect of probabilities. To pit these two possibilities against each other, we fitted cumulative prospect theory (CPT) to the choices of individual participants, separately for choices between options with affect-rich outcomes (adverse medical side effects) and options with affect-poor outcomes (monetary losses); additionally, we tested a simple model of probability neglect, the minimax rule. The results indicated a qualitative difference in cognitive mechanisms between the affect-rich and affect-poor problems. Specifically, in affect-poor problems, the large majority of participants were best described by CPT; in affect-rich problems, the proportion of participants best described by the minimax rule was substantially higher. The affect gap persisted even when affect-rich outcomes were supplemented by numerical information, thus providing no support for the thesis that choices in affect-rich and affect-poor problems diverge because the information provided in the former is nonnumerical. Our findings suggest that the traditional expectation-based framework for modeling risky decision making may not readily generalize to affect-rich choices.
Emotion and Knowledge in Decision Making under Uncertainty
Games
This paper presents four incentivised experiments analysing jointly the separate role of immediate integral emotions and knowledge in individual decision making under ambiguity. Reactions to a natural source of uncertainty (i.e., forthcoming real-world election results) were measured using both computed decision weights derived from individual choices and judgmental probabilities determined from the subjects’ estimated likelihood of election outcomes. This study used self-reports to measure emotions aroused by the prospective election victory of a party/coalition of parties, and both self-assessed and actual competence to measure knowledge of politics. This paper found evidence of both preference for ambiguity in the gain domain and of likelihood insensitivity, namely the tendency to overweight unlikely events and to underweight likely events. This paper also shows that a superior knowledge of politics was associated with a preference for ambiguity (i.e., the elevation of the decisi...
Emotions, competence and confidence in choice under uncertainty
2007
This paper presents the results of two experiments testing reaction to risk and uncertainty of a sample of 66 Italian university students. Risky prospects were based on games of chance, while uncertain lotteries were based on the forthcoming results of either the May 2001 Italian general political election or the June 2004 election for the European Parliament. We computed decision weights for risk and uncertainty; we also collected data as regards the subjects' degree of belief, expressed by probability judgements, for the same uncertain events. Our results show that the subjects' behaviour is consistent with expected utility theory as regards risk, but not under uncertainty. In particular, our subjects show a strong superadditivity in the decision weights and the possibility effect (lower subadditivity) is stronger than the certainty effect (upper subadditivity). There is also evidence that emotions, actual competence and confidence positively affect the possibility effect, whereas they do not have any influence on the certainty effect, reinforcing the lack of symmetry between the two effects.
Psychological Bulletin, 1994
Much of decision aiding uses a divide-and-conquer strategy to help people with risky decisions. Assessing the utility of outcomes and one's degree of belief in their likelihood are assumed to be separable tasks, the results of which can then be combined to determine the preferred alternative. Evidence from different areas of psychology now provides a growing consensus that this assumption is too simplistic. Observed dependencies in the evaluation of uncertain outcomes and the likelihood of the events giving rise to them are frequent and systematic. Dependencies seem to derive from general strategic processes that take into consideration asymmetric costs of over-vs. underestimates of uncertain quantities. This asymmetric-loss-function interpretation provides a psychological explanation for observed judgments and decisions under uncertainty and links them to other judgment tasks. The decision weights estimated when applying dependent-utility models to choices are not simply reflections of perceived subjective probability but a response to several constraints, all of which modify the weight of risky or uncertain outcomes.
Cognitive Processes in Decisions Under Risk are not the Same as in Decisions Under Uncertainty
Frontiers in Neuroscience, 2012
We deal with risk versus uncertainty, a distinction that is of fundamental importance for cognitive neuroscience yet largely neglected. In a world of risk ("small world"), all alternatives, consequences, and probabilities are known. In uncertain ("large") worlds, some of this information is unknown or unknowable. Most of cognitive neuroscience studies exclusively study the neural correlates for decisions under risk (e.g., lotteries), with the tacit implication that understanding these would lead to an understanding of decision making in general. First, we show that normative strategies for decisions under risk do not generalize to uncertain worlds, where simple heuristics are often the more accurate strategies. Second, we argue that the cognitive processes for making decisions in a world of risk are not the same as those for dealing with uncertainty. Because situations with known risks are the exception rather than the rule in human evolution, it is unlikely that our brains are adapted to them. We therefore suggest a paradigm shift toward studying decision processes in uncertain worlds and provide first examples.
Decision Affect Theory: Emotional Reactions to the Outcomes of Risky Options
How do people feel about the outcomes of risky options? Results from two experiments demonstrate that the emotional reaction to a monetary outcome is not a simple function of the utility of that outcome Emotional responses also depend on probabilities and unobtained outcomes Unexpected outcomes have greater emotional impact than expected outcomes Furthermore any given outcome is less pleasant if an unobtained outcome is better We propose an account of emotional experiences associated with outcomes of decisions called decision affect theory It incorporates utilities expectations and counterfactual comparisons into hedonic responses Finally we show that choices between risky options can be described as the maximization of expected emotional experiences as predicted by decision affect theory That is people choose the risky option for which they expect to feel better on average