When and why rare events are underweighted: A direct comparison of the sampling, partial feedback, full feedback and description choice paradigms

Camilleri, Adrian R.; Newell, Ben R.

doi:10.3758/s13423-010-0040-2

Cited by 96 publications

(95 citation statements)

References 27 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Recently, a number of studies have shown that such decisions from experience can yield very different patterns of behaviours than decision from description, especially when the outcomes occur rarely (e.g., Camilleri & Newell, 2011;Hertwig, Barron, Weber, & Erev, 2004;Hertwig & Erev, 2009;Ludvig & Spetch, 2011). The general finding is that in decisions from experience, as in decisions from description, people are generally risk averse for gains with moderate probabilities (Erev et al, 2010;Ert & Yechiam, 2010).…”

Section: Introductionmentioning

confidence: 57%

Rapid makes risky: Time pressure increases risk seeking in decisions from experience

Madan

Spetch

Ludvig

2015

Journal of Cognitive Psychology

View full text Add to dashboard Cite

Time pressure is a common constraint on many real-world decisions, such as those made by traders placing orders in the stock market, bidders in an auction, or gamblers at a casino. Many of these situations also involve elements of risk or uncertainty. Previous research has mostly found that time pressure leads to more risky choices. These previous studies, however, have examined decisions made from probabilities that were explicitly described, rather than learned through experienced outcomes. Here we tested how time pressure influences decisions from experience, while manipulating outcome value. Participants under greater time pressure chose risky options more often, independent of outcome value. Our results suggest that, as with decisions from description, time pressure moderately increases risk seeking in decisions from experience.

show abstract

Section: Introductionmentioning

confidence: 57%

Rapid makes risky: Time pressure increases risk seeking in decisions from experience

Madan

Spetch

Ludvig

2015

Journal of Cognitive Psychology

View full text Add to dashboard Cite

show abstract

“…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).…”

Section: Abstract Computational Modeling Endowment Effect Risky Dmentioning

confidence: 99%

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

Pachur

Scheibehenne

2017

Psychon Bull Rev

View full text Add to dashboard Cite

People often indicate a higher price for an object when they own it (i.e., as sellers) than when they do not (i.e., as buyers)-a phenomenon known as the endowment effect. We develop a cognitive modeling approach to formalize, disentangle, and compare alternative psychological accounts (e.g., loss aversion, loss attention, strategic misrepresentation) of such buyer-seller differences in pricing decisions of monetary lotteries. To also be able to test possible buyer-seller differences in memory and learning, we study pricing decisions from experience, obtained with the sampling paradigm, where people learn about a lottery's payoff distribution from sequential sampling. We first formalize different accounts as models within three computational frameworks (reinforcement learning, instance-based learning theory, and cumulative prospect theory), and then fit the models to empirical selling and buying prices. In Study 1 (a reanalysis of published data with hypothetical decisions), models assuming buyer-seller differences in response bias (implementing a strategicmisrepresentation account) performed best; models assuming buyer-seller differences in choice sensitivity or memory (implementing a loss-attention account) generally fared worst. In a new experiment involving incentivized decisions (Study 2), models assuming buyer-seller differences in both outcome sensitivity (as proposed by a loss-aversion account) and response bias performed best. In both Study 1 and 2, the models implemented in cumulative prospect theory performed best. Model recovery studies validated our cognitive modeling approach, showing that the models can be distinguished rather well. In summary, our analysis supports a loss-aversion account of the endowment effect, but also reveals a substantial contribution of simple response bias. Keywords Computational modeling . Endowment effect . Risky decision making . Decision from experience . Loss aversionThe minimum price at which people are willing to accept to sell an object they own is often higher than the maximum price they are willing to pay for the same object when they do not own it. This systematic difference between buying and selling prices-which can also occur within the same person when taking different perspectives-is known as the endowment effect (Kahneman, Knetsch, & Thaler, 1990, 1991Thaler, 1980; see also Birnbaum & Stegner, 1979). The endowment effect has attracted considerable attention because it contradicts a central tenet of economic theory: According to the Coase theorem, the value of an object should be independent of its initial ownership (Kahneman et al., 1990).There have been several proposals as to which cognitive mechanisms give rise to the endowment effect, or how buyers' and sellers' cognitive mechanisms might differ generally.1 For instance, there may be asymmetries between buyers and sellers in terms of the order in which they search for positive 1 Note that this issue is orthogonal to the question of which aspects of being endowed-such as ownership, expectations...

show abstract

“…This design contrasts with the sampling procedure, where participants first learn about the outcomes from each option by sampling and then make a single consequential choice (e.g., Described and experienced risky choices 4 Camilleri & Newell, 2011;Hertwig & Erev, 2009). In previous work with such a partialfeedback design, we showed that when these experienced risky options potentially lead to an extreme, but common, outcome (i.e., the highest and lowest outcomes in a context), people are more risk seeking for gains than for losses-the opposite of the usual reflection effect in description (e.g., Ludvig et al, 2014a).…”

Section: Introductionmentioning

confidence: 99%

“…Most demonstrations that people behave differently in decisions from description and experience have used between-subject designs (e.g., Barron & Erev, 2003;Camilleri & Newell, 2011;Hertwig et al, 2004). These designs limit the evaluation of what factors differentially affect risk preference in description and experience within individuals.…”

Section: Introductionmentioning

confidence: 99%

The Role of Memory in Distinguishing Risky Decisions from Experience and Description

Madan

Ludvig

2017

Quarterly Journal of Experimental Psychology

View full text Add to dashboard Cite

Described and experienced risky choices 2 AbstractPeople's risk preferences differ for choices based on described probabilities versus those based on information learned through experience. For decisions from description, people are typically more risk averse for gains than losses. In contrast, for decisions from experience, people are sometimes more risk seeking for gains than losses, especially for choices with the possibility of extreme outcomes (big wins or big losses), which are systematically overweighed in memory.Using a within-subject design, this study evaluated whether this memory bias plays a role in the differences in risky choice between description and experience. As in previous studies, people were more risk seeking for losses than for gains in description but showed the opposite pattern in experience. People also more readily remembered the extreme outcomes and judged them as having occurred more frequently. These memory biases correlated with risk preferences in decisions from experience but not in decisions from description. These results suggest that systematic memory biases may be responsible for some of the differences in risk preference across description and experience.

show abstract

When and why rare events are underweighted: A direct comparison of the sampling, partial feedback, full feedback and description choice paradigms

Cited by 96 publications

References 27 publications

Rapid makes risky: Time pressure increases risk seeking in decisions from experience

Rapid makes risky: Time pressure increases risk seeking in decisions from experience

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

The Role of Memory in Distinguishing Risky Decisions from Experience and Description

Contact Info

Product

Resources

About