Goals and plans in decision making
AbstractWe propose a constructed-choice model for general decision making. The model departs from utility theory and prospect theory in its treatment of multiple goals and it suggests several different ways in which context can affect choice. It is particularly instructive to apply this model to protective decisions, which are often puzzling. Among other anomalies, people insure against non-catastrophic events, underinsure against catastrophic risks, and allow extraneous factors to influence insurance purchases and other protective decisions. Neither expected-utility theory nor prospect theory can explain these anomalies satisfactorily. To apply this model to the above anomalies, we consider many different insurance-related goals, organized in a taxonomy, and we consider the effects of context on goals, resources, plans and decision rules. The paper concludes by suggesting some prescriptions for improving individual decision making with respect to protective measures.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Society for Judgment and Decision Making in its journal Judgment and Decision Making.
Volume (Year): 2 (2007)
Issue (Month): (June)
Contact details of provider:
goals; plans; decision making; catastrophic risk; insurance; utility theory; prospect theory; protective behavior;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gregory W. Fischer & Ziv Carmon & Dan Ariely & Gal Zauberman, 1999. "Goal-Based Construction of Preferences: Task Goals and the Prominence Effect," Management Science, INFORMS, vol. 45(8), pages 1057-1075, August.
- Hogarth, Robin M & Kunreuther, Howard, 1995. "Decision Making under Ignorance: Arguing with Yourself," Journal of Risk and Uncertainty, Springer, vol. 10(1), pages 15-36, January.
- Kunreuther, Howard & Sanderson, Warren & Vetschera, Rudolf, 1985. "A behavioral model of the adoption of protective activities," Journal of Economic Behavior & Organization, Elsevier, vol. 6(1), pages 1-15, March.
- Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
- Matthew Rabin, 2001.
"Diminishing Marginal Utility of Wealth Cannot Explain Risk Aversion,"
Game Theory and Information
- Matthew Rabin., 2000. "Diminishing Marginal Utility of Wealth Cannot Explain Risk Aversion," Economics Working Papers E00-287, University of California at Berkeley.
- Rabin, Matthew, 2000. "Diminishing Marginal Utility of Wealth Cannot Explain Risk Aversion," Department of Economics, Working Paper Series qt61d7b4pg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Cass R. Sunstein & Richard H. Thaler, 2003.
"Libertarian paternalism is not an oxymoron,"
Conference Series ; [Proceedings],
Federal Reserve Bank of Boston, vol. 48(Jun).
- Amos Tversky & Daniel Kahneman, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Levine's Working Paper Archive
7656, David K. Levine.
- Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
- Gerard Debreu, 1959. "Topological Methods in Cardinal Utility Theory," Cowles Foundation Discussion Papers 76, Cowles Foundation for Research in Economics, Yale University.
- Veronika K–bberling & Peter P. Wakker, 2004. "A Simple Tool for Qualitatively Testing, Quantitatively Measuring, and Normatively Justifying Savage's Subjective Expected Utility," Journal of Risk and Uncertainty, Springer, vol. 28(2), pages 135-145, 03.
- Johnson, Eric J, et al, 1993. " Framing, Probability Distortions, and Insurance Decisions," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 35-51, August.
- Hsee, Christopher K & Kunreuther, Howard C, 2000. " The Affection Effect in Insurance Decisions," Journal of Risk and Uncertainty, Springer, vol. 20(2), pages 141-59, March.
- Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-24, December.
- Colin F. Camerer & Howard Kunreuther, 1989. "Decision processes for low probability events: Policy implications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(4), pages 565-592.
- Tversky, Amos & Slovic, Paul & Kahneman, Daniel, 1990. "The Causes of Preference Reversal," American Economic Review, American Economic Association, vol. 80(1), pages 204-17, March.
- Michael Braun & Peter S. Fader & Eric T. Bradlow & Howard Kunreuther, 2006. "Modeling the "Pseudodeductible" in Insurance Claims Decisions," Management Science, INFORMS, vol. 52(8), pages 1258-1272, August.
- Daniel Sutter & Marc Poitras, 2010. "Do people respond to low probability risks? Evidence from tornado risk and manufactured homes," Journal of Risk and Uncertainty, Springer, vol. 40(2), pages 181-196, April.
- Susan Laury & Melayne McInnes & J. Swarthout, 2009. "Insurance decisions for low-probability losses," Journal of Risk and Uncertainty, Springer, vol. 39(1), pages 17-44, August.
- Weber, Elke U. & Johnson, Eric J., 2012. "Psychology and behavioral economics lessons for the design of a green growth strategy," Policy Research Working Paper Series 6240, The World Bank.
- Botzen, W.J.W. & van den Bergh, J.C.J.M., 2012. "Risk attitudes to low-probability climate change risks: WTP for flood insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 151-166.
- Ganna Pogrebna & David Krantz & Christian Schade & Claudia Keser, 2011. "Words versus actions as a means to influence cooperation in social dilemma situations," Theory and Decision, Springer, vol. 71(4), pages 473-502, October.
- Todd McElroy & John J. Seta, 2007. "Framing the frame: How task goals determine the likelihood and direction of framing effects," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 2, pages 251-256, August.
- Milch, Kerry F. & Weber, Elke U. & Appelt, Kirstin C. & Handgraaf, Michel J.J. & Krantz, David H., 2009. "From individual preference construction to group decisions: Framing effects and group processes," Organizational Behavior and Human Decision Processes, Elsevier, vol. 108(2), pages 242-255, March.
- Arora, Poonam & Peterson, Nicole D. & Krantz, David H. & Hardisty, David J. & Reddy, Kavita S., 2012. "To cooperate or not to cooperate: Using new methodologies and frameworks to understand how affiliation influences cooperation in the present and future," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 842-853.
- Kurt Carlson & Chris Janiszewski & Ralph Keeney & David Krantz & Howard Kunreuther & Mary Luce & J. Russo & Stijn Osselaer & Detlof Winterfeldt, 2008. "A theoretical framework for goal-based choice and for prescriptive analysis," Marketing Letters, Springer, vol. 19(3), pages 241-254, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jonathan Baron).
If references are entirely missing, you can add them using this form.