The Disjunction Effect in Choice under Uncertainty

Abstract

One of the basic axioms of the rational theory of decision under uncertainty is Savage's (1954) sure-thing principle (STP) It states that if prospect x is preferred to y knowing that Event A occurred, and if x is preferred to y knowing that A did not occur, then x should be preferred to y even when it is not known whether A occurred We present examples in which the decision maker has good reasons for accepting x if A occurs, and different reasons for accepting x if A does not occur Not knowing whether or not A occurs, however, the decision maker may lack a clear reason for accepting x and may opt for another option We suggest that, in the presence of uncertainty, people are often reluctant to think through the implications of each outcome and, as a result, may violate STP This interpretation is supported by the observation that STP is satisfied when people are made aware of their preferences given each outcome

Comparison Opportunity and Judgment Revision

“…Third, competitive comparisons offer compelling reference points that may deviate significantly from the reference points people originally used in their initial evaluations. The change of reference points can be a potent trigger of judgment revisions (Hsee & Leclerc, 1998;Tversky & Shaffir, 1992). Finally, recent research suggests that in judgment and choice, people have a natural tendency to assess the mapping of features across alternatives.…”

Effective Siting of Waste Treatment Facilities

“…In fact, empirical estimates find that losses are weighted about twice as strongly as gains [20,39]. Many people, for example, reject a 50-50 chance to win $200 or lose $100, even though the gain is twice as large as the loss [40]. Preferences that weigh losses more heavily than gains are said to exhibit "loss aversion.…”

6.2.1 Tradeoff Studies and Cognitive Biases

“…Conflict Among Alternatives and the Search for Dominance Tversky and Shafir [1992] found these results in the presence of conflicting choices: "You can either select one of these gambles or you can pay $1 to add one more gamble to the choice set. The added gamble will be selected at random from the list you reviewed.…”

“…In an experiment by Tversky and Shafir [1992], students were asked to fill out a questionnaire for $1.50. They were then offered either a metal zebra pen for the $1.50, or they were offered a choice of a metal zebra pen or two plastic pilot pens for the $1.50.…”