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The effect of unpleasant experiences on evaluation and behavior

Author

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  • Schurr, Amos
  • Rodensky, Dotan
  • Erev, Ido

Abstract

Analyses of the impact of unpleasant experiences reveal two contradictory effects: direct studies of experienced utility reflect overweighting the peak (rare and most extreme) experience, but studies of decisions from experience reflect underweighting of the peak and reliance on the frequent experiences. The present research highlights the role of two contributors to this pattern. First, the results suggest that evaluations are more sensitive to rare events than decisions. It seems that the implied weighting of the peak experiences is a reflection of beliefs that affect evaluation and decisions in different ways. Second, the results show clear indications of underweighting rare events in ongoing decisions, but not in planning decisions. This pattern can be explained with the assertion of beliefs concerning the probability of the peak event is approximately accurate on average, but it changes from trial to trial. The potential value of these results is highlighted with a discussion of safety enhancement in industrial settings.

Suggested Citation

  • Schurr, Amos & Rodensky, Dotan & Erev, Ido, 2014. "The effect of unpleasant experiences on evaluation and behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 1-9.
    • Handle: RePEc:eee:jeborg:v:106:y:2014:i:c:p:1-9
    DOI: 10.1016/j.jebo.2014.05.012
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    References listed on IDEAS

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    1. Daniel Kahneman & Peter P. Wakker & Rakesh Sarin, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 375-406.
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    4. Lejarraga, Tomás & Gonzalez, Cleotilde, 2011. "Effects of feedback and complexity on repeated decisions from description," Organizational Behavior and Human Decision Processes, Elsevier, vol. 116(2), pages 286-295.
    5. Greg Barron & Eldad Yechiam, 2009. "The coexistence of overestimation and underweighting of rare events and the contingent recency effect," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 4(6), pages 447-460, October.
    6. Barkan, Rachel, 2002. "Using a signal detection safety model to simulate managerial expectations and supervisory feedback," Organizational Behavior and Human Decision Processes, Elsevier, vol. 89(2), pages 1005-1031, November.
    7. Reinhard Selten & Thorsten Chmura, 2008. "Stationary Concepts for Experimental 2x2-Games," American Economic Review, American Economic Association, vol. 98(3), pages 938-966, June.
    8. Barkan, Rachel & Zohar, Dov & Erev, Ido, 1998. "Accidents and Decision Making under Uncertainty: A Comparison of Four Models," Organizational Behavior and Human Decision Processes, Elsevier, vol. 74(2), pages 118-144, May.
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