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The impact of experience on decisions based on pre-choice samples and the face-or-cue hypothesis

Author

Listed:
  • Ido Erev

    (Technion)

  • Ofir Yakobi

    (University of Waterloo)

  • Nathaniel J. S. Ashby

    (Harrisburg University of Science and Technology)

  • Nick Chater

    (University of Warwick)

Abstract

The growing literature on how people learn to make decisions based on experience focuses on two types of paradigms. In one paradigm, people are faced with a choice, and must retrospectively consult past experience of similar choices to decide what to do. In the other paradigm, people are faced with a choice, and then have the opportunity prospectively to gather new experiences that might help them make that choice. The current paper examines the joint impact of both retrospective and prospective experiences. Two experiments reveal strong interactions. In Study 1, repeated experience with new samples appears to reduce sensitivity to the average outcome in the samples and enhances underweighting of rare events. Study 2 shows that repeated experience with pre-choice samples can reverse the impact of the new information (and decrease the tendency to select the alternative that provides the best outcome in the new sample). The results suggest that prospectively gathering new samples can have two, potentially contrasting, influences on choice: the first focuses on the sample’s face value and selects the option with the higher value in the new sample; by contrast, the second treats the new sample as a cue to recall similar prior experiences, which in turn drive choice. The paper concludes with a discussion of the possibility that part of the descriptive value of prospect theory reflects the fact that it summarizes the joint impact of similar “face-or-cue” processes.

Suggested Citation

  • Ido Erev & Ofir Yakobi & Nathaniel J. S. Ashby & Nick Chater, 2022. "The impact of experience on decisions based on pre-choice samples and the face-or-cue hypothesis," Theory and Decision, Springer, vol. 92(3), pages 583-598, April.
    • Handle: RePEc:kap:theord:v:92:y:2022:i:3:d:10.1007_s11238-021-09856-7
    DOI: 10.1007/s11238-021-09856-7
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    References listed on IDEAS

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    1. Mohammed Abdellaoui & Olivier L'Haridon & Corina Paraschiv, 2011. "Experienced vs. Described Uncertainty: Do We Need Two Prospect Theory Specifications?," Management Science, INFORMS, vol. 57(10), pages 1879-1895, October.
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    7. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
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