Underweighting rare events in experience based decisions: Beyond sample error

Barron, Greg; Ursino, Giovanni

doi:10.1016/j.joep.2013.09.002

Cited by 23 publications

(52 citation statements)

References 25 publications

(22 reference statements)

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“…The CSP, by design, represents a case of risk, as the objective probabilities are available to the subjects through sampling experience. 3 Among the previous studies, only the study by Barron and Ursino ( 2013 ) investigated the description-experience gap under risk (their experiment 1). However, their study made inferences only about the relative weightings of rare outcomes under DFE compared with those under DFD but not about the actual over- or under-weighting of rare outcomes under DFE.…”

Section: Relation To Previous Dfe Literaturementioning

confidence: 99%

Experience and rationality under risk: re-examining the impact of sampling experience

Aydogan

Gao

2020

Exp Econ

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A recent strand of the literature on decision-making under uncertainty has pointed to an intriguing behavioral gap between decisions made from description and decisions made from experience. This study reinvestigates this description-experience gap to understand the impact that sampling experience has on decisions under risk. Our study adopts a complete sampling paradigm to address the lack of control over experienced probabilities by requiring complete sampling without replacement. We also address the roles of utilities and ambiguity, which are central in most current decision models in economics. Thus, our experiment identifies the deviations from expected utility due to over-(or under-) weighting of probabilities. Our results confirm the existence of the behavioral gap, but they provide no evidence for the underweighting of small probabilities within the complete sampling treatment. We find that sampling experience attenuates rather than reverses the inverse S-shaped probability weighting under risk.

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Section: Relation To Previous Dfe Literaturementioning

confidence: 99%

Experience and rationality under risk: re-examining the impact of sampling experience

Aydogan

Gao

2020

Exp Econ

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“…One finding arising from such comparisons is that small probabilities appear to be underweighted in experience-based choice (Barron & Erev, 2003)-not overweighted, as is typical in decisionsfrom-description (Gonzalez & Wu, 1999;Prelec, 1998;Kahneman & Tversky, 1979). Given this divergence between decisions-from-experience and those from description, researchers have sought to understand how people use experience to inform their choices (Barron & Ursino, 2013;Dutt & Gonzalez, 2012;Erev et al, 2010;Lejarraga, Hertwig, & Gonzalez, 2012).…”

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confidence: 99%

Eyes on the Prize? Evidence of Diminishing Attention to Experienced and Foregone Outcomes in Repeated Experiential Choice

Ashby

Rakow

2015

Behavioral Decision Making

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Recently there has been increased interest in decisions-from-experience (where decision makers learn from observing the outcomes of previous choices), which provide valuable insights into the learning and preference construction processes underlying many daily decisions. Several process models have been developed to capture these processes, and while such models often fit the data well, many assume that the decision maker is a vigilant observer, processing each outcome. In two studies, we provide a critical test of this assumption using eye tracking to record directed visual attention when participants choose repeatedly among two options, each time being shown the outcome for their chosen option and for the foregone option. Consistently, we find that the vigilance assumption is not supported, with decision makers often not attending to outcome information. Moreover, (in)attention to outcomes is predictable, with vigilance decreasing as more choices are made, and being greater for obtained than for foregone outcomes, and when options deliver only gains as opposed to losses, or a mixture of gains and losses. Furthermore, we find that this variation in attentional allocation plays a central role in the apparent indecisiveness (inconsistency) in choice, with increased attention to foregone outcomes predicting switches to that option on the next choice. Together, these findings highlight the value of eye tracking in investigations of decisions-from-experience, providing novel insight into cognitive processes underlying them.

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“…Indeed, earlier studies show that experience-based decisions often have limited correspondence with decisions that are based on explicit a-priori probabilities. Specifically, it has been shown that people are less averse to losses Risk assessment under perceptual ambiguity 5 and may even prefer risky option when decisions are made based on subjective experience (Barron & Erev, 2003;Barron & Ursino, 2013;Erev & Barron, 2005;Erev, Ert & Yechiam, 2008;Jessup, Bishara & Busemeyer, 2008;Weber, Shafir & Blais, 2004;see Hertwig & Erev, 2009 for a review). This latter kind of deviation from an optimal decision-making strategy may occur due to the payoff-variability effect.…”

Section: Introductionmentioning

confidence: 99%

Risk Assessment Under Perceptual Ambiguity and its Impact on Category Learning

Hammer¹,

Cerf²

2019

Preprint

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Proper item categorization often requires prolonged learning of the value (gain or loss probabilities) associated with different items. We tested individual differences in learning strategies where the need to discriminate between two perceptually similar categories cooccurred with the need to learn the mean value of items within each category. In the primary experimental condition, participants had to learn that items in one category were always associated with a positive monetary value (+7¢ in 100% of the trials), whereas items in another, "risky" category were associated either with a larger monetary gain (+10¢ in 75% of the trials) or with a substantial loss (-27¢ in 25% of the trials). We found that even after hundreds of learning trials, participants often preferred an item from the second, risky category over an item from the always-positive-value category, despite a respective mean-value ratio of approximately 1:9 between the two categories. On the other hand, in the two other experimental conditions, where the value of the items in one category was always higher than the value of the items in the other category, participants quickly learned to identify which category of items had greater mean value, and preferred those items, as expected. The substantial overvaluing of items from a risky category (with lower mean item-value) over the always-positive-value category (with much higher mean item-value) indicates that under conditions that involve risk-taking and the transfer of knowledge between tasks, experience-based categorization decisions may substantially deviate from Bayesian inference driven by experience.Risk assessment under perceptual ambiguity 3

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Underweighting rare events in experience based decisions: Beyond sample error

Cited by 23 publications

References 25 publications

Experience and rationality under risk: re-examining the impact of sampling experience

Experience and rationality under risk: re-examining the impact of sampling experience

Eyes on the Prize? Evidence of Diminishing Attention to Experienced and Foregone Outcomes in Repeated Experiential Choice

Risk Assessment Under Perceptual Ambiguity and its Impact on Category Learning

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