The role of representation in experience-based choice
Recently it has been observed that different choices can be made about structurally identical risky decisions depending on whether information about outcomes and their probabilities is learned by description or from experience. Current evidence is equivocal with respect to whether this choice ``gap'' is entirely an artefact of biased samples. The current experiment investigates whether a representational bias exists at the point of encoding by examining choice in light of decision makers' mental representations of the alternatives, measured with both verbal and nonverbal judgment probes. We found that, when estimates were gauged by the nonverbal probe, participants presented with information in description format (as opposed to experience) had a greater tendency to overestimate rare events and underestimate common events. The choice gap, however, remained even when accounting for this judgment distortion and the effects of sampling bias. Indeed, participants' estimation of the outcome distribution did not mediate their subsequent choice. It appears that experience-based choices may derive from a process that does not explicitly use probability information.
Volume (Year): 4 (2009)
Issue (Month): 7 (December)
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- 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 263-291, March.
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- Liat Hadar & Craig R. Fox, 2009. "Information asymmetry in decision from description versus decision from experience," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 4(4), pages 317-325, June.
- Craig R. Fox & Liat Hadar, 2006. ""Decisions from experience" = sampling error + prospect theory: Reconsidering Hertwig, Barron, Weber & Erev (2004)," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 1, pages 159-161, November.
- Craig R. Fox & Amos Tversky, 1998. "A Belief-Based Account of Decision Under Uncertainty," Management Science, INFORMS, vol. 44(7), pages 879-895, July.
- 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.
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