ABSTRACT-When people have access to information sources such as newspaper weather forecasts, drug-package inserts, and mutual-fund brochures, all of which provide convenient descriptions of risky prospects, they can make decisions from description. When people must decide whether to back up their computer's hard drive, cross a busy street, or go out on a date, however, they typically do not have any summary description of the possible outcomes or their likelihoods. For such decisions, people can call only on their own encounters with such prospects, making decisions from experience. Decisions from experience and decisions from description can lead to dramatically different choice behavior. In the case of decisions from description, people make choices as if they overweight the probability of rare events, as described by prospect theory. We found that in the case of decisions from experience, in contrast, people make choices as if they underweight the probability of rare events, and we explored the impact of two possible causes of this underweighting-reliance on relatively small samples of information and overweighting of recently sampled information. We conclude with a call for two different theories of risky choice.

The present paper explores situations in which the information available to decision makers is limited to feedback concerning the outcomes of their previous decisions. The results reveal that experience in these situations can lead to deviations from maximization in the opposite direction of the deviations observed when the decisions are made based on a description of the choice problem. Experience was found to lead to a reversed common ratio/certainty effect, more risk seeking in the gain than in the loss domain, and to an underweighting of small probabilities. Only one of the examined properties of description-based decisions, loss aversion, seems to emerge robustly in these 'feedback-based' decisions. These results are summarized with a simple model that illustrates that all the unique properties of feedback-based decisions can be a product of a tendency to rely on recent outcomes. Copyright # 2003 John Wiley & Sons, Ltd. key words Probability learning; feedback-based decisions; reinforcement learning; prospect theory; Allais paradox Many common activities involve 'small' decision problems. Driving, for example, requires repeated selection among routes, speeds, and various other options. Although little time and effort is typically invested in these and similar small decisions, they can be consequential. The estimated cost of traffic accidents in the USA is more than 100 billion dollars a year (see e.g. Blincoe, 1994 1 ), and many of the accidents are at least partially products of ex-post unwise decisions.The current paper focuses on an important subset of the small decision problems exemplified above that can be referred to as 'small feedback-based' decisions. These problems are defined by three main properties. First, they are repeated; decision makers face the same problem many times in similar situations. Second,

Analysis of binary choice behavior in iterated tasks with immediate feedback reveals robust deviations from maximization that can be described as indications of 3 effects: (a) a payoff variability effect, in which high payoff variability seems to move choice behavior toward random choice; (b) underweighting of rare events, in which alternatives that yield the best payoffs most of the time are attractive even when they are associated with a lower expected return; and (c) loss aversion, in which alternatives that minimize the probability of losses can be more attractive than those that maximize expected payoffs. The results are closer to probability matching than to maximization. Best approximation is provided with a model of reinforcement learning among cognitive strategies (RELACS). This model captures the 3 deviations, the learning curves, and the effect of information on uncertainty avoidance. It outperforms other models in fitting the data and in predicting behavior in other experiments.

An examination of the behavioral effect of repeated terrorist attacks reveals that local residents (of the attacked area) appear to be much less sensitive to this risk than international tourists. Furthermore, the limited sensitivity on the part of local residents seems to diminish with time, even when the attacks continue. An experimental study shows a similar pattern in a laboratory experiment that focuses on a basic decision task: when making a single decision based on a description of the problem, people tend to be more risk averse. Personal experience with the problem reduces this sensitivity. These results highlight an interesting relationship between basic decision-making research and the study of the response to traumatic events.

Waiting is examined here as a psychological experience, through propositions regarding the relationship between the design of a queue and the emotions and attitudes of people waiting. Propositions are tested using a paradigm that both controls features of queue structure and allows collection of real-time data from people waiting. Data collected from 134 participants confirm that people closer to a service agent are more pleased than those further away. But people waiting in a single-queue structure are shown to feel more predictability and arousal than those waiting in a multiple-queue structure. Waiting in a multiple-queue structure is, however, shown to produce a sense of lack of justice, even when no objective inequalities exist. The study suggests a useful paradigm for evaluating alternative queue structures in a laboratory setting and provides insights about psychological aspects of waiting. Both the method and the results suggest an extensive agenda for future research.