Degrees of uncertainty: An overview and framework for future research on experience‐based choice

Abstract

A striking finding has emerged recently in the literature: When decision makers are faced with essentially the same choice, their preferences differ as a function of whether options are described or are ''experienced'' via observation and feedback. For example, when presented the described choice: (A) A 90% chance of $0 and a 10% chance of $10 or (B) $1 for sure, people tend to prefer (A). But when those same two options are experienced through observation of ''draws'' from two payoff distributions that match the described options, the modal preference reverses. Why? This is just one question that the papers in this special issue address. In addition, they address the rich repertoire of issues that arise when one considers experience-based choices. The decisions-fromexperience paradigm-with its focus on the acquisition and integration of information prior to choice, as well the choice itself-taps many of the fundamentals of psychology (learning, memory, encoding, knowledge representation, modelling) thus inspiring novel and fruitful avenues for research. This paper reviews recent research on experience-based choice, and highlights the contribution of the papers in the special issue. The paper introduces a framework that places different types of decisions along a continuum of uncertainty about what one is choosing between, which emphasizes the rich and varied role of ''experience'' in decision making. It ends by identifying important unsolved questions that are ripe for future research.

Decisions from experience: Why small samples?

“…1 This description-experience gap has been replicated across a wide range of studies (e.g., Erev, Glozman, & Hertwig, 2008;Hau et al, 2010;Hau, Pleskac, Kiefer, & Hertwig, 2008;Rakow, Demes, & Newell, 2008;Ungemach, Chater, & Stewart, 2009;Weber et al, 2004; for a review of experience-based decision making see Hertwig & Erev, 2009, and for a special issue on experience-based decision making see Rakow & Newell, 2010). For bees and humans, the source of the relative lack of appreciation of rare events appears to be the same: the small samples on which they base their choice.…”

Unpacking buyer-seller differences in valuation from experience: A cognitive modeling approach

“…If, as proposed by Yechiam and Hochman (2013a), sellers pay more attention to the task than buyers do, they may differ in the learning process-a possibility that has not been tested previously. The sampling paradigm-and decisions from experience in general-are increasingly employed to examine risky choice, in particular because it lays open the underlying search and learning processes (e.g., Newell & Camilleri, 2011;Hertwig, 2015;Hills & Hertwig, 2010;Lejarraga, Hertwig, & Gonzalez, 2012;Rakow, Demes, & Newell, 2008;Rakow & Newell, 2010). Decisions from experience are also increasingly being used to study pricing decisions for individual objects (e.g., Ashby & Rakow, 2014;Golan & Ert, 2015).…”

The dynamics of choice in a changing world: Effects of full and partial feedback

“…Indeed, ever since the earliest research in learning (e.g., Thorndyke's, 1927, law of effect), and all the way to modern-day research on decisions from experience (Barron & Erev, 2003;Hertwig, Barron, Weber, & Erev, 2004;Hertwig & Erev, 2009;Rakow & Newell, 2010), it has been well known that repeated choices are outcome-driven. There is less consensus, however, as to what aspects of the outcome of a choice are most critical in determining subsequent choice.…”