Decision Sciences › General Decision Sciences

Decision-Making and Behavioral Economics

Works Count: 45711

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This cluster of papers explores the intersection of psychology and economics, focusing on behavioral economics and decision making. It covers topics such as risk aversion, time discounting, heuristic decision making, the influence of emotion on choices, cognitive reflection, prospect theory, nudging, and the anchoring effect.

Keywords

Risk Aversion; Decision Making; Time Discounting; Heuristic; Emotion; Cognitive Reflection; Delay Discounting; Prospect Theory; Nudging; Anchoring Effect

MONEY, INCOME, AND CAUSALITY

1972-01-01

Christopher A. Sims

Judgment under uncertainty: Heuristics and biases

1982-04-30

Amos Tversky , Daniel Kahneman

Many decisions are based on beliefs concerning the likelihood of uncertain events such as the outcome of an election, the guilt of a defendant, or the future value of the … Many decisions are based on beliefs concerning the likelihood of uncertain events such as the outcome of an election, the guilt of a defendant, or the future value of the dollar. These beliefs are usually expressed in statements such as “I think that …,” “chances are …,” “it is unlikely that …,” and so forth. Occasionally, beliefs concerning uncertain events are expressed in numerical form as odds or subjective probabilities. What determines such beliefs? How do people assess the probability of an uncertain event or the value of an uncertain quantity? This article shows that people rely on a limited number of heuristic principles which reduce the complex tasks of assessing probabilities and predicting values to simpler judgmental operations. In general, these heuristics are quite useful, but sometimes they lead to severe and systematic errors.

Representativeness Revisited: Attribute Substitution in Intuitive Judgment

2002-07-08

Daniel Kahneman , Shane Frederick

The program of research now known as the heuristics and biases approach began with a survey of 84 participants at the 1969 meetings of the Mathematical Psychology Society and the … The program of research now known as the heuristics and biases approach began with a survey of 84 participants at the 1969 meetings of the Mathematical Psychology Society and the American Psychological Association (Tversky & Kahneman, 1971). The respondents, including several authors of statistics texts, were asked realistic questions about the robustness of statistical estimates and the replicability of research results. The article commented tongue-in-heek on the prevalence of a belief that the law of large numbers applies to small numbers as well: Respondents placed too much confidence in the results of small samples, and their statistical judgments showed little sensitivity to sample size.

Implications of rational inattention

2003-04-01

Christopher A. Sims

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RATIONAL CHOICE AND THE FRAMING OF DECISIONS

1988-10-28

Amos Tversky , Daniel Kahneman

The modern theory of decision making under risk emerged from a logical analysis of games of chance rather than from a psychological analysis of risk and value. The theory was … The modern theory of decision making under risk emerged from a logical analysis of games of chance rather than from a psychological analysis of risk and value. The theory was conceived as a normative model of an idealized decision maker, not as a description of the behavior of real people. In Schumpeter's words, it "has a much better claim to being called a logic of choice than a psychology of value" (1954, p. 1058).

Heuristics and Biases: The Psychology of Intuitive Judgment

2004-10-01

William P. Bottom , Thomas Gilovich , Dale W. Griffin +1 more

A review is presented of the book “Heuristics and Biases: The Psychology of Intuitive Judgment,” edited by Thomas Gilovich, Dale Griffin, and Daniel Kahneman. A review is presented of the book “Heuristics and Biases: The Psychology of Intuitive Judgment,” edited by Thomas Gilovich, Dale Griffin, and Daniel Kahneman.

Rational choice and the structure of the environment.

1956-01-01

H. A. Simon

A growing interest in decision making in psychology is evidenced by the recent publication of Edwards’ review article in the Psychological Bulletin (1) and the Santa Monica Conference volume, Decision … A growing interest in decision making in psychology is evidenced by the recent publication of Edwards’ review article in the Psychological Bulletin (1) and the Santa Monica Conference volume, Decision Processes (7). In this work, much attention has been focused on the characterization of rational choice, and because the latter topic has been a central concern in economics, the theory of decision making has become a natural meeting ground for psychological and economic theory. A comparative examination of the models of adaptive behavior employed in psychology (e.g., learning theories), and of the models of rational behavior employed in economics, shows that in almost all respects the latter postulate a much greater complexity in the choice mechanisms, and a much larger capacity in the organism for obtaining information and performing computations, than do the former. Moreover, in the limited range of situations where the predictions of the two theories have been compared (see [7, Ch. 9, 10, 18]), the learning theories appear to account for the observed behavior rather better than do the theories of rational behavior. Both from these scanty data and from an examination of the postulates of the economic models it appears probable that, however adaptive the behavior of organisms in learning and choice situations, this adaptiveness falls far short of the ideal of “maximizing” postulated in economic theory. Evidently, organisms adapt well enough to “satisfice”; they do not, in general, “optimize.” If this is the case, a great deal can be learned about rational decision making by taking into account, at the outset, the limitations upon the capacities and complexity of the organism, and by taking account of the fact that the environments to which it must adapt possess properties that permit further simplication of its choice mechanisms. It may be useful, therefore, to ask: How simple a set of choice mechanisms can we postulate and still obtain the gross features of observed adaptive choice behavior? In a previous paper (6) I have put forth some suggestions as to the kinds of “approximate” rationality that might be employed by an organism possessing limited information and limited computational facilities. The suggestions were “hypothetical” in that, lacking definitive knowledge of the human decisional processes, we can only conjecture on the basis of our everyday experiences, our introspection, and a very limited body of psychological literature what these

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Status quo bias in decision making

1988-03-01

William Samuelson , Richard Zeckhauser

Reaching a Consensus

1974-03-01

Morris H. DeGroot

Abstract Consider a group of individuals who must act together as a team or committee, and suppose that each individual in the group has his own subjective probability distribution for … Abstract Consider a group of individuals who must act together as a team or committee, and suppose that each individual in the group has his own subjective probability distribution for the unknown value of some parameter. A model is presented which describes how the group might reach agreement on a common subjective probability distribution for the parameter by pooling their individual opinions. The process leading to the consensus is explicitly described and the common distribution that is reached is explicitly determined. The model can also be applied to problems of reaching a consensus when the opinion of each member of the group is represented simply as a point estimate of the parameter rather than as a probability distribution.

Subjective probability: A judgment of representativeness

1972-07-01

Daniel Kahneman , Amos Tversky

The Utility Analysis of Choices Involving Risk

1948-08-01

Milton Friedman , Leonard J. Savage

Toward a positive theory of consumer choice

1980-03-01

Richard H. Thaler

Gender differences in risk taking: A meta-analysis.

1999-05-01

James P. Byrnes , David C. Miller , William D. Schafer

The authors conducted a meta-analysis of 150 studies in which the risk-taking tendencies of male and female participants were compared. Studies were coded with respect to type of task (e.g., … The authors conducted a meta-analysis of 150 studies in which the risk-taking tendencies of male and female participants were compared. Studies were coded with respect to type of task (e.g., self-reported behaviors vs. observed behaviors), task content (e.g., smoking vs. sex), and 5 age levels. Results showed that the average effects for 14 out of 16 types of risk taking were significantly larger than 0 (indicating greater risk taking in male participants) and that nearly half of the effects were greater than .20. However, certain topics (e.g., intellectual risk taking and physical skills) produced larger gender differences than others (e.g., smoking). In addition, the authors found that (a) there were significant shifts in the size of the gender gap between successive age levels, and (b) the gender gap seems to be growing smaller over time. The discussion focuses on the meaning of the results for theories of risk taking and the need for additional studies to clarify age trends.

Loss Aversion in Riskless Choice: A Reference-Dependent Model

1991-11-01

Amos Tversky , Daniel Kahneman

Much experimental evidence indicates that choice depends on the status quo or reference level: changes of reference point often lead to reversals of preference. We present a reference-dependent theory of … Much experimental evidence indicates that choice depends on the status quo or reference level: changes of reference point often lead to reversals of preference. We present a reference-dependent theory of consumer choice, which explains such effects by a deformation of indifference curves about the reference point. The central assumption of the theory is that losses and disadvantages have greater impact on preferences than gains and advantages. Implications of loss aversion for economic behavior are considered.

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Regret Theory: An Alternative Theory of Rational Choice Under Uncertainty

1982-12-01

Graham Loomes , Robert Sugden

Journal Article Regret Theory: An Alternative Theory of Rational Choice Under Uncertainty Get access Graham Loomes, Graham Loomes University of Newcastle Search for other works by this author on: Oxford … Journal Article Regret Theory: An Alternative Theory of Rational Choice Under Uncertainty Get access Graham Loomes, Graham Loomes University of Newcastle Search for other works by this author on: Oxford Academic Google Scholar Robert Sugden Robert Sugden University of Newcastle Search for other works by this author on: Oxford Academic Google Scholar The Economic Journal, Volume 92, Issue 368, 1 December 1982, Pages 805–824, https://doi.org/10.2307/2232669 Published: 01 December 1982

Advances in prospect theory: Cumulative representation of uncertainty

1992-10-01

Amos Tversky , Daniel Kahneman

A theory of anticipated utility

1982-12-01

John Quiggin

Maps of Bounded Rationality: Psychology for Behavioral Economics

2003-11-01

Daniel Kahneman

Daniel Kahneman received the Nobel Prize in economics sciences in 2002, December 8, Stockholm, Sweden. This article is the edited version of his Nobel Prize lecture. The author comes back … Daniel Kahneman received the Nobel Prize in economics sciences in 2002, December 8, Stockholm, Sweden. This article is the edited version of his Nobel Prize lecture. The author comes back to the problems he has studied with the late Amos Tversky and to debates conducting for several decades already. The statement is based on worked out together with Shane Federik the quirkiness of human judgment. Language: ru

A perspective on judgment and choice: Mapping bounded rationality.

2003-01-01

Daniel Kahneman

Early studies of intuitive judgment and decision making conducted with the late Amos Tversky are reviewed in the context of two related concepts: an analysis of accessibility, the ease with … Early studies of intuitive judgment and decision making conducted with the late Amos Tversky are reviewed in the context of two related concepts: an analysis of accessibility, the ease with which thoughts come to mind; a distinction between effortless intuition and deliberate reasoning. Intuitive thoughts, like percepts, are highly accessible. Determinants and consequences of accessibility help explain the central results of prospect theory, framing effects, the heuristic process of attribute substitution, and the characteristic biases that result from the substitution of nonextensional for extensional attributes. Variations in the accessibility of rules explain the occasional corrections of intuitive judgments. The study of biases is compatible with a view of intuitive thinking and decision making as generally skilled and successful.

Choices, Values, and Frames

2013-07-01

Daniel Kahneman , Amos Tversky

Maxmin expected utility with non-unique prior

1989-01-01

Itzhak Gilboa , David Schmeidler

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Confirmation Bias: A Ubiquitous Phenomenon in Many Guises

1998-06-01

Raymond S. Nickerson

Confirmation bias, as the term is typically used in the psychological literature, connotes the seeking or interpreting of evidence in ways that are partial to existing beliefs, expectations, or a … Confirmation bias, as the term is typically used in the psychological literature, connotes the seeking or interpreting of evidence in ways that are partial to existing beliefs, expectations, or a hypothesis in hand. The author reviews evidence of such a bias in a variety of guises and gives examples of its operation in several practical contexts. Possible explanations are considered, and the question of its utility or disutility is discussed.

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Mood, misattribution, and judgments of well-being: Informative and directive functions of affective states.

1983-09-01

Norbert Schwarz , Gerald L. Clore

Les auteurs cherchent a savoir si l'humeur dans lequel le sujet se trouve au moment ou on lui demande d'evaluer sa satisfaction existentielle, influence precisement ces evaluations Les auteurs cherchent a savoir si l'humeur dans lequel le sujet se trouve au moment ou on lui demande d'evaluer sa satisfaction existentielle, influence precisement ces evaluations

Heuristic Decision Making

2010-12-02

Gerd Gigerenzer , Wolfgang Gaissmaier

As reflected in the amount of controversy, few areas in psychology have undergone such dramatic conceptual changes in the past decade as the emerging science of heuristics. Heuristics are efficient … As reflected in the amount of controversy, few areas in psychology have undergone such dramatic conceptual changes in the past decade as the emerging science of heuristics. Heuristics are efficient cognitive processes, conscious or unconscious, that ignore part of the information. Because using heuristics saves effort, the classical view has been that heuristic decisions imply greater errors than do “rational” decisions as defined by logic or statistical models. However, for many decisions, the assumptions of rational models are not met, and it is an empirical rather than an a priori issue how well cognitive heuristics function in an uncertain world. To answer both the descriptive question (“Which heuristics do people use in which situations?”) and the prescriptive question (“When should people rely on a given heuristic rather than a complex strategy to make better judgments?”), formal models are indispensable. We review research that tests formal models of heuristic inference, including in business organizations, health care, and legal institutions. This research indicates that (a) individuals and organizations often rely on simple heuristics in an adaptive way, and (b) ignoring part of the information can lead to more accurate judgments than weighting and adding all information, for instance for low predictability and small samples. The big future challenge is to develop a systematic theory of the building blocks of heuristics as well as the core capacities and environmental structures these exploit.

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The Framing of Decisions and the Psychology of Choice

1981-01-30

Amos Tversky , Daniel Kahneman

The psychological principles that govern the perception of decision problems and the evaluation of probabilities and outcomes produce predictable shifts of preference when the same problem is framed in different … The psychological principles that govern the perception of decision problems and the evaluation of probabilities and outcomes produce predictable shifts of preference when the same problem is framed in different ways. Reversals of preference are demonstrated in choices regarding monetary outcomes, both hypothetical and real, and in questions pertaining to the loss of human lives. The effects of frames on preferences are compared to the effects of perspectives on perceptual appearance. The dependence of preferences on the formulation of decision problems is a significant concern for the theory of rational choice.

Doing It Now or Later

1999-03-01

Ted O’Donoghue , Matthew Rabin

We examine self-control problems—modeled as time-inconsistent, present-biased preferences—in a model where a person must do an activity exactly once. We emphasize two distinctions: Do activities involve immediate costs or immediate … We examine self-control problems—modeled as time-inconsistent, present-biased preferences—in a model where a person must do an activity exactly once. We emphasize two distinctions: Do activities involve immediate costs or immediate rewards, and are people sophisticated or naive about future self-control problems? Naive people procrastinate immediate-cost activities and preproperate—do too soon—immediate-reward activities. Sophistication mitigates procrastination, but exacerbates preproperation. Moreover, with immediate costs, a small present bias can severely harm only naive people, whereas with immediate rewards it can severely harm only sophisticated people. Lessons for savings, addiction, and elsewhere are discussed. (JEL A12, B49, C70, D11, D60, D74, D91, E21)

The Theory of Reasoned Action: A Meta-Analysis of Past Research with Recommendations for Modifications and Future Research

1988-12-01

Blair H. Sheppard , Jon Hartwick , Paul R. Warshaw

Two meta-analyses were conducted to Investigate the effectiveness of the Fishbein and Ajzen model in research to date. Strong overall evidence for the predictive utility of the model was found. … Two meta-analyses were conducted to Investigate the effectiveness of the Fishbein and Ajzen model in research to date. Strong overall evidence for the predictive utility of the model was found. Although numerous instances were identified in which researchers overstepped the boundary conditions initially proposed for the model, the predictive utility remained strong across conditions. However, three variables were proposed and found to moderate the effectiveness of the model. Suggested extensions to the model are discussed and general directions for future research are given.

Fear, anger, and risk.

2001-01-01

Jennifer S. Lerner , Dacher Keltner

Drawing on an appraisal-tendency framework (J. S. Lerner & D. Keltner, 2000), the authors predicted and found that fear and anger have opposite effects on risk perception. Whereas fearful people … Drawing on an appraisal-tendency framework (J. S. Lerner & D. Keltner, 2000), the authors predicted and found that fear and anger have opposite effects on risk perception. Whereas fearful people expressed pessimistic risk estimates and risk-averse choices, angry people expressed optimistic risk estimates and risk-seeking choices. These opposing patterns emerged for naturally occurring and experimentally induced fear and anger. Moreover, estimates of angry people more closely resembled those of happy people than those of fearful people. Consistent with predictions, appraisal tendencies accounted for these effects: Appraisals of certainty and control moderated and (in the case of control) mediated the emotion effects. As a complement to studies that link affective valence to judgment outcomes, the present studies highlight multiple benefits of studying specific emotions.

Mental Accounting and Consumer Choice

2008-01-01

Richard H. Thaler

Anew model of consumer behavior is developed using a hybrid of cognitive psychology and microeconomics. The development of the model starts with the mental coding of combinations of gains and … Anew model of consumer behavior is developed using a hybrid of cognitive psychology and microeconomics. The development of the model starts with the mental coding of combinations of gains and losses using the prospect theory value function. Then the evaluation of purchases is modeled using the new concept of “transaction utility.” The household budgeting process is also incorporated to complete the characterization of mental accounting. Several implications to marketing, particularly in the area of pricing, are developed. This article was originally published in Marketing Science, Volume 4, Issue 3, pages 199–214, in 1985.

Prospect theory: An analysis of decision under risk

1988-03-25

Daniel Kahneman , Amos Tversky

Expected utility theory has dominated the analysis of decision making under risk. It has been generally accepted as a normative model of rational choice (Keeney and Raiffa, 1976), and widely … Expected utility theory has dominated the analysis of decision making under risk. It has been generally accepted as a normative model of rational choice (Keeney and Raiffa, 1976), and widely applied as a descriptive model of economic behavior (e.g., Friedman and Savage, 1948, and Arrow, 1971). Thus, it is assumed that all reasonable people would wish to obey the axioms of the theory (von Neumann & Morgenstern, 1944, and Savage, 1954), and that most people actually do, most of the time.

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Unrealistic optimism about future life events.

1980-11-01

Neil D. Weinstein

Two studies investigated the tendency of people to be unrealistically optimistic about future life events. In Study 1, 258 college students estimated how much their own chances of experiencing 42 … Two studies investigated the tendency of people to be unrealistically optimistic about future life events. In Study 1, 258 college students estimated how much their own chances of experiencing 42 events differed from the chances of their classmates. Overall, they rated their own chances to be above average for positive events and below average for negative events, ps<.001. Cognitive and motivational considerations led to predictions that degree of desirability, perceived probability, personal experience, perceived controllability, and stereotype salience would influence the amount of optimistic bias evoked by different events. All predictions were supported, although the pattern of effects differed for positive and negative events. Study 2 tested the idea that people are unrealistically optimistic because they focus on factors that improve their own chances of achieving desirable outcomes and fail to realize that others may have just as many factors in their favor. Students listed the factors that they thought influenced their own chances of experiencing eight future events. When such lists were read by a second group of students, the amount of unrealistic optimism shown by this second group for the same eight events decreased significantly, although it was not eliminated.

The case for motivated reasoning.

1990-01-01

Ziva Kunda

It is proposed that motivation may affect reasoning through reliance on a biased set of cognitive processes--that is, strategies for accessing, constructing, and evaluating beliefs. The motivation to be accurate … It is proposed that motivation may affect reasoning through reliance on a biased set of cognitive processes--that is, strategies for accessing, constructing, and evaluating beliefs. The motivation to be accurate enhances use of those beliefs and strategies that are considered most appropriate, whereas the motivation to arrive at particular conclusions enhances use of those that are considered most likely to yield the desired conclusion. There is considerable evidence that people are more likely to arrive at conclusions that they want to arrive at, but their ability to do so is constrained by their ability to construct seemingly reasonable justifications for these conclusions. These ideas can account for a wide variety of research concerned with motivated reasoning.

Dual-Processing Accounts of Reasoning, Judgment, and Social Cognition

2007-12-21

Jonathan St. B. T. Evans

This article reviews a diverse set of proposals for dual processing in higher cognition within largely disconnected literatures in cognitive and social psychology. All these theories have in common the … This article reviews a diverse set of proposals for dual processing in higher cognition within largely disconnected literatures in cognitive and social psychology. All these theories have in common the distinction between cognitive processes that are fast, automatic, and unconscious and those that are slow, deliberative, and conscious. A number of authors have recently suggested that there may be two architecturally (and evolutionarily) distinct cognitive systems underlying these dual-process accounts. However, it emerges that (a) there are multiple kinds of implicit processes described by different theorists and (b) not all of the proposed attributes of the two kinds of processing can be sensibly mapped on to two systems as currently conceived. It is suggested that while some dual-process theories are concerned with parallel competing processes involving explicit and implicit knowledge systems, others are concerned with the influence of preconscious processes that contextualize and shape deliberative reasoning and decision-making.

Managerial Perspectives on Risk and Risk Taking

1987-11-01

James G. March , Zur Shapira

This paper explores the relation between decision theoretic conceptions of risk and the conceptions held by executives. It considers recent studies of risk attitudes and behavior among managers against the … This paper explores the relation between decision theoretic conceptions of risk and the conceptions held by executives. It considers recent studies of risk attitudes and behavior among managers against the background of conceptions of risk derived from theories of choice. We conclude that managers take risks and exhibit risk preferences, but the processes that generate those observables are somewhat removed from the classical processes of choosing from among alternative actions in terms of the mean (expected value) and variance (risk) of the probability distributions over possible outcomes. We identify three major ways in which the conceptions of risk and risk taking held by these managers lead to orientations to risk that are different from what might be expected from a decision theory perspective: Managers are quite insensitive to estimates of the probabilities of possible outcomes; their decisions are particularly affected by the way their attention is focused on critical performance targets; and they make a sharp distinction between taking risks and gambling. These differences, along with closely related observations drawn from other studies of individual and organizational choice, indicate that the behavioral phenomenon of risk taking in organizational settings will be imperfectly understood within a classical conception of risk.

The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence

1985-07-01

Hersh Shefrin , Meir Statman

ABSTRACT One of the most significant and unique features in Kahneman and Tversky's approach to choice under uncertainty is aversion to loss realization. This paper is concerned with two aspects … ABSTRACT One of the most significant and unique features in Kahneman and Tversky's approach to choice under uncertainty is aversion to loss realization. This paper is concerned with two aspects of this feature. First, we place this behavior pattern into a wider theoretical framework concerning a general disposition to sell winners too early and hold losers too long. This framework includes other elements, namely mental accounting, regret aversion, self‐control, and tax considerations. Second, we discuss evidence which suggests that tax considerations alone cannot explain the observed patterns of loss and gain realization, and that the patterns are consistent with a combined effect of tax considerations and the three other elements of our framework. We also show that the concentration of loss realizations in December is not consistent with fully rational behavior, but is consistent with our theory.

Reasoning the fast and frugal way: Models of bounded rationality.

1996-10-01

Gerd Gigerenzer , Daniel G. Goldstein

Humans and animals make inferences about the world under limited time and knowledge. In contrast, many models of rational inference treat the mind as a Laplacean Demon, equipped with unlimited … Humans and animals make inferences about the world under limited time and knowledge. In contrast, many models of rational inference treat the mind as a Laplacean Demon, equipped with unlimited time, knowledge, and computational might. Following H. Simon's notion of satisfying, the authors have proposed a family of algorithms based on a simple psychological mechanism: one-reason decision making. These fast and frugal algorithms violate fundamental tenets of classical rationality: They neither look up nor integrate all information. By computer simulation, the authors held a competition between the satisfying "Take The Best" algorithm and various "rational" inference procedures (e.g., multiple regression). The Take The Best algorithm matched or outperformed all competitors in inferential speed and accuracy. This result in an existence proof that cognitive mechanisms capable of successful performance in the real world do not need to satisfy the classical norms of rational inference.

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Cognitive Reflection and Decision Making

2005-11-01

Shane Frederick

This paper introduces a three-item “Cognitive Reflection Test” (CRT) as a simple measure of one type of cognitive ability—the ability or disposition to reflect on a question and resist reporting … This paper introduces a three-item “Cognitive Reflection Test” (CRT) as a simple measure of one type of cognitive ability—the ability or disposition to reflect on a question and resist reporting the first response that comes to mind. The author will show that CRT scores are predictive of the types of choices that feature prominently in tests of decision-making theories, like expected utility theory and prospect theory. Indeed, the relation is sometimes so strong that the preferences themselves effectively function as expressions of cognitive ability—an empirical fact begging for a theoretical explanation. The author examines the relation between CRT scores and two important decision-making characteristics: time preference and risk preference. The CRT scores are then compared with other measures of cognitive ability or cognitive “style.” The CRT scores exhibit considerable difference between men and women and the article explores how this relates to sex differences in time and risk preferences. The final section addresses the interpretation of correlations between cognitive abilities and decision-making characteristics.

False-Positive Psychology

2011-10-17

Joseph P. Simmons , Leif D. Nelson , Uri Simonsohn

In this article, we accomplish two things. First, we show that despite empirical psychologists’ nominal endorsement of a low rate of false-positive findings (≤ .05), flexibility in data collection, analysis, … In this article, we accomplish two things. First, we show that despite empirical psychologists’ nominal endorsement of a low rate of false-positive findings (≤ .05), flexibility in data collection, analysis, and reporting dramatically increases actual false-positive rates. In many cases, a researcher is more likely to falsely find evidence that an effect exists than to correctly find evidence that it does not. We present computer simulations and a pair of actual experiments that demonstrate how unacceptably easy it is to accumulate (and report) statistically significant evidence for a false hypothesis. Second, we suggest a simple, low-cost, and straightforwardly effective disclosure-based solution to this problem. The solution involves six concrete requirements for authors and four guidelines for reviewers, all of which impose a minimal burden on the publication process.

Extensional versus intuitive reasoning: The conjunction fallacy in probability judgment.

1983-10-01

Amos Tversky , Daniel Kahneman

Perhaps the simplest and the most basic qualitative law of probability is the conjunction rule: The probability of a conjunction, P (A&B) cannot exceed the probabilities of its constituents, P … Perhaps the simplest and the most basic qualitative law of probability is the conjunction rule: The probability of a conjunction, P (A&B) cannot exceed the probabilities of its constituents, P (A) and P (B), because the extension (or the possibility set) of the conjunction is included in the extension of its constituents. Judgments under uncertainty, however, are often mediated by intuitive heuristics that are not bound by the conjunction rule. A conjunction can be more representative than one of its constituents, and instances of a specific category can be easier to imagine or to retrieve than instances of a more inclusive category. The representativeness and availability heuristics therefore can make a conjunction appear more probable than one of its constituents. This phenomenon is demonstrated in a variety of contexts including estimation of word frequency, personality judgment, medical prognosis, decision under risk, suspicion of criminal acts, and political forecasting. Systematic violations of the conjunction rule are observed in judgments of lay people and of experts in both between-subjects and within-subjects comparisons. Alternative interpretations of the conjunction fallacy are discussed and attempts to combat it are explored.

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Telling more than we can know: Verbal reports on mental processes.

1977-05-01

Richard E. Nisbett , Timothy D. Wilson

Evidence is reviewed which suggests that there may be little or no direct introspective access to higher order cognitive processes. Subjects are sometimes (a) unaware of the existence of a … Evidence is reviewed which suggests that there may be little or no direct introspective access to higher order cognitive processes. Subjects are sometimes (a) unaware of the existence of a stimulus that importantly influenced a response, (b) unaware of the existence of the response, and (c) unaware that the stimulus has affected the response. It is proposed that when people attempt to report on their cognitive processes, that is, on the processes mediating the effects of a stimulus on a response, they do not do so on the basis of any true introspection. Instead, their reports are based on a priori, implicit causal theories, or judgments about the extent to which a particular stimulus is a plausible cause of a given response. This suggests that though people may not be able to observe directly their cognitive processes, they will sometimes be able to report accurately about them. Accurate reports will occur when influential stimuli are salient and are plausible causes of the responses they produce, and will not occur when stimuli are not salient or are not plausible causes.

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Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias

1991-02-01

Daniel Kahneman , Jack L. Knetsch , Richard H. Thaler

A wine-loving economist we know purchased some nice Bordeaux wines years ago at low prices. The wines have greatly appreciated in value, so that a bottle that cost only $10 … A wine-loving economist we know purchased some nice Bordeaux wines years ago at low prices. The wines have greatly appreciated in value, so that a bottle that cost only $10 when purchased would now fetch $200 at auction. This economist now drinks some of this wine occasionally, but would neither be willing to sell the wine at the auction price nor buy an additional bottle at that price. Thaler (1980) called this pattern—the fact that people often demand much more to give up an object than they would be willing to pay to acquire it—the endowment effect. The example also illustrates what Samuelson and Zeckhauser (1988) call a status quo bias, a preference for the current state that biases the economist against both buying and selling his wine. These anomalies are a manifestation of an asymmetry of value that Kahneman and Tversky (1984) call loss aversion—the disutility of giving up an object is greater that the utility associated with acquiring it. This column documents the evidence supporting endowment effects and status quo biases, and discusses their relation to loss aversion.

Individual differences in reasoning: Implications for the rationality debate?

2000-10-01

Keith E. Stanovich , Richard F. West

Much research in the last two decades has demonstrated that human responses deviate from the performance deemed normative according to various models of decision making and rational judgment (e.g., the … Much research in the last two decades has demonstrated that human responses deviate from the performance deemed normative according to various models of decision making and rational judgment (e.g., the basic axioms of utility theory). This gap between the normative and the descriptive can be interpreted as indicating systematic irrationalities in human cognition. However, four alternative interpretations preserve the assumption that human behavior and cognition is largely rational. These posit that the gap is due to (1) performance errors, (2) computational limitations, (3) the wrong norm being applied by the experimenter, and (4) a different construal of the task by the subject. In the debates about the viability of these alternative explanations, attention has been focused too narrowly on the modal response. In a series of experiments involving most of the classic tasks in the heuristics and biases literature, we have examined the implications of individual differences in performance for each of the four explanations of the normative/descriptive gap. Performance errors are a minor factor in the gap; computational limitations underlie non-normative responding on several tasks, particularly those that involve some type of cognitive decontextualization. Unexpected patterns of covariance can suggest when the wrong norm is being applied to a task or when an alternative construal of the task should be considered appropriate.

Review of personality and social psychology

1983-01-01

Martin Davies

Risk as feelings.

2001-01-01

George Loewenstein , Elke U. Weber , Christopher K. Hsee +1 more

Virtually all current theories of choice under risk or uncertainty are cognitive and consequentialist. They assume that people assess the desirability and likelihood of possible outcomes of choice alternatives and … Virtually all current theories of choice under risk or uncertainty are cognitive and consequentialist. They assume that people assess the desirability and likelihood of possible outcomes of choice alternatives and integrate this information through some type of expectation-based calculus to arrive at a decision. The authors propose an alternative theoretical perspective, the risk-as-feelings hypothesis, that highlights the role of affect experienced at the moment of decision making. Drawing on research from clinical, physiological, and other subfields of psychology, they show that emotional reactions to risky situations often diverge from cognitive assessments of those risks. When such divergence occurs, emotional reactions often drive behavior. The risk-as-feelings hypothesis is shown to explain a wide range of phenomena that have resisted interpretation in cognitive-consequentialist terms.

Time Discounting and Time Preference: A Critical Review

2002-06-01

Shane Frederick , George Loewenstein , Ted O’Donoghue

Decision making under extinction risk

2025-06-24

Maximilian Maier , Adam J. L. Harris , David Kellen +1 more | Cognitive Psychology

In everyday life, people routinely make decisions that involve irredeemable risks such as death (e.g., while driving). Even though these decisions under extinction risk are common, practically important, and have … In everyday life, people routinely make decisions that involve irredeemable risks such as death (e.g., while driving). Even though these decisions under extinction risk are common, practically important, and have different properties compared to the types of decisions typically studied by decision scientists, they have received little research attention. The present work advances the formal understanding of decision making under extinction risk by introducing a novel experimental paradigm, the Extinction Gambling Task (EGT). We derive optimal strategies for three different types of extinction and near-extinction events, and compare them to participants' choices in three experiments. Leveraging computational modelling to describe strategies at the individual level, we document strengths and shortcomings in participants' decisions under extinction risk. Specifically, we find that, while participants are relatively good in terms of the qualitative strategies they employ, their decisions are nevertheless affected by loss chasing, scope insensitivity, and opportunity cost neglect. We hope that by formalising decisions under extinction risk and providing a task to study them, this work will facilitate future research on an important topic that has been largely ignored.

Lossy encoding of distributions in judgment under uncertainty

2025-06-24

Tadeg Quillien , Neil R Bramley , Christopher G. Lucas | Cognitive Psychology

Age Differences Between Young and Older Adults in Decision-Making Under Risk: A Cross-Sectional Study

2025-06-24

Tindara Caprì , Rosa Angela Fabio , Maria Grazia Gioia | Journal of Ageing and Longevity

Background: Decision-making under risk is a crucial process for undertaking health behaviors. Although the influence of individual differences on decision-making under risk has been widely examined, there is no clear … Background: Decision-making under risk is a crucial process for undertaking health behaviors. Although the influence of individual differences on decision-making under risk has been widely examined, there is no clear consensus yet as to how to explain this process considering both young and older adults. The main aim of this preliminary study was to examine age differences in decision-making under risk, risk propensity, sensation-seeking, and self-conscious emotions between younger and older adults. Methods: A total of 40 subjects (20 young adults and 20 older adults) participated in the present study. The young adults were aged 18–35 years (M = 23.25, SD = 2.59). The older adults were aged 65–70 years (M = 68.50, SD = 4.01). Participants completed the Risk Propensity Scale, the Sensation-Seeking Scale, the Test of Self-Conscious Affect, and the Prisoner’s Dilemma Game. Results: The results indicated that the groups showed different behaviors in sensation-seeking (p < 0.001, pη2 = 0.14). The older group showed a larger propensity to seek recreational activities and unconventional behaviors than the younger group (p < 0.0001, d = 0.78; p = 0.001, d = 0.75). Also, the older adults demonstrated a greater inclination toward pride (p < 0.01, d= 0.78), whereas younger adults exhibited a stronger tendency towards shame (p < 0.01, d= 0.76). Conclusions: These data suggest a shift in risk preferences as individuals age, potentially influenced by a variety of psychological, social, and experiential factors. The applications of this study can support psychological well-being, productivity, and quality of life in later adulthood.

Who prioritizes costs more? Exploring individual differences in decision-making processes

2025-06-24

Haibo Yang , Yi Lin , Junsheng Liu | Personality and Individual Differences

Person‐Centered Measurement: Ensuring Prioritization of Individuals’ Values, Needs, and Preferences Within the Global Contraceptive Measurement Ecosystem

2025-06-23

C. Rothschild , Kelsey Holt , Funmilola M. OlaOlorun +3 more | Studies in Family Planning

Despite growing enthusiasm for measurement approaches that capture individuals' needs, values, and preferences, there remains a lack of conceptual clarity regarding person-centered measurement in the global field of contraception. In … Despite growing enthusiasm for measurement approaches that capture individuals' needs, values, and preferences, there remains a lack of conceptual clarity regarding person-centered measurement in the global field of contraception. In this commentary, we propose a working definition of person-centered measurement within the contraceptive field and describe how this definition can be applied to existing and novel contraceptive indicators. We argue that person-centered measures of contraception must both reflect an individual's self-identified values, needs, and/or preferences related to contraception and allow an individual to assess the extent to which these values, needs, and/or preferences have been fulfilled. As a result, a person-centered measure allows the individual to define for themselves whether a "good" outcome has been achieved. While person-centered measures are a critical component of measuring the performance of contraceptive programs, measurement frameworks must also include non-person-centered measures that allow evaluation of normative constructs such as human rights and reproductive justice.

Estimating Behavioral Inattention

2025-06-23

Jonathan Benchimol , Lahcen Bounader , Mario Dotta | Journal of Economic Behavior & Organization

A unified treatment of risk and ambiguity within a rank-dependent framework

2025-06-23

Lara Buchak | Theory and Decision

Trade-off aversion and indecisive behaviours

2025-06-21

Edwin Ip , Stephen Nei | Journal of Economic Behavior & Organization

AI-enhanced nudging in public policy: why to worry and how to respond

2025-06-21

Stefano Calboli , Bart Engelen | Mind & Society

Abstract What role can artificial intelligence (AI) play in enhancing public policy nudges and the extent to which these help people achieve their own goals? Can it help mitigate or … Abstract What role can artificial intelligence (AI) play in enhancing public policy nudges and the extent to which these help people achieve their own goals? Can it help mitigate or even overcome the challenges that nudgers face in this respect? This paper discusses how AI-enhanced personalization can help make nudges more means paternalistic and thus more respectful of people’s ends. We explore the potential added value of AI by analyzing to what extent it can, (1) help identify individual preferences and (2) tailor different nudging techniques to different people based on variations in their susceptibility to those techniques. However, we also argue that the successes booked in this respect in the for-profit sector cannot simply be replicated in public policy. While AI can bring benefits to means paternalist public policy nudging, it also has predictable downsides (lower effectiveness compared to the private sector) and risks (graver consequences compared to the private sector). We discuss the practical implications of all this and propose novel strategies that both consumers and regulators can employ to respond to private AI use in nudging with the aim of safeguarding people’s autonomy and agency.

Not only self-views but also any ratings converge without conversations due to reduced noise bias

2025-06-20

Keise Izuma , Kyosuke Kakinuma | Proceedings of the National Academy of Sciences

Evaluating the role of mental sampling in probability judgments: Illogical rankings occur in a predictable manner

2025-06-20

X. Liu , Arndt Bröder , Henrik Singmann | Cognition

People's probability judgments often appear to be probabilistically incoherent, as exemplified by the conjunction fallacy. Recently, various sampling-based models have been proposed as an integrative account for different biases and … People's probability judgments often appear to be probabilistically incoherent, as exemplified by the conjunction fallacy. Recently, various sampling-based models have been proposed as an integrative account for different biases and fallacies in probability judgments. In the current study, the novel Event Ranking Task was used to investigate sampling-based models of probability judgments. On each trial of the Event Ranking Task, participants were asked to provide a ranking for an event set consisting of four events, A, not-A, B, and not-B, in terms of their perceived likelihoods. Qualitative predictions were formally derived by assuming direct sampling from a fixed underlying probability distribution. Adding read-out noise in the sampling process - as suggested in the Probability Theory plus Noise model (Costello and Watts, 2014) - did not change the qualitative predictions. Two online experiments, where participants ranked twelve different event sets, yielded results in line with the qualitative predictions, providing evidence for the idea that mental sampling underlies probability judgments.

Defining deliberation for dual-process models of reasoning

2025-06-19

Wim De Neys | Nature Reviews Psychology

People overshoot when choosing resource pools

2025-06-19

Christopher K. Hsee , Xilin Li , Ying Zeng | Journal of Experimental Social Psychology

A Replication and Extension of Three Studies Investigating Escalation of Commitment and Regret Aversion

2025-06-19

Nandita Dhanda , Ignazio Ziano , Kam Hoi Ching +5 more | Personality and Social Psychology Bulletin

This article presents preregistered replications of three influential studies in the field of escalation of commitment and regret aversion. In Study 1, we found partial support for Staw’s (1976) article … This article presents preregistered replications of three influential studies in the field of escalation of commitment and regret aversion. In Study 1, we found partial support for Staw’s (1976) article on the effects of personal responsibility and consequences on the escalation of commitment. Study 2 failed to replicate Zeelenberg et al. (1996) article examining the role of feedback on risk preferences. The extension of study 2 found a small correlation between the tendency to experience regret and risk preferences of participants in the Safe ONLY condition. In Study 3, we failed to replicate Wong and Kwong’s (2007) results that showed a causal effect of personal responsibility and regret possibility on the escalation of commitment. Moreover, study 3’s extension found no support for individual differences in neuroticism on the escalation of commitment. The impact of this replication on our understanding of decision-making processes and the factors that contribute to individuals’ commitment to their choices will be discussed.

Behavioral climate change: does thinking about future consequences of climate change affect risk preferences and cooperation?

2025-06-19

Sven Grüner , Oliver Mußhoff | Climatic Change

Choice, Preference, Rationality

2025-06-18

Rosen Lutskanov | Ethics Science Education

The paper sketches a theoretical framework that has the required expressive power to deal with the phenomenon of preference reversal. This phenomenon is studied in three different contexts: rational choice … The paper sketches a theoretical framework that has the required expressive power to deal with the phenomenon of preference reversal. This phenomenon is studied in three different contexts: rational choice theory, epistemology, and ethics. A common underlying theme is identified: the so-called higher-order interactions stemming from the epistemic value of the available alternatives. In order to capture them I employ the concept of a relational system. It is shown that this mathematical structure, along with several crucial concepts (regularity, stratifiedness, coherence), is enough to capture the essential features of preference reversal. Building on this insight, the paper proposes several new lines of research, based on the common structure exemplified by these seemingly different domains.

The Current State of Behavioural Economics Studies: A Bibliometric Analysis

2025-06-18

Wei Guo , Rossazana Ab-Rahim , Abdul Hayy Haziq Mohamad +1 more | International Journal of Economics and Financial Issues

The aim of this paper is to present the current state of the published literature related to behavioural economics studies. This paper presents a bibliometric analysis of 1757 documents on … The aim of this paper is to present the current state of the published literature related to behavioural economics studies. This paper presents a bibliometric analysis of 1757 documents on behavioural economics published between 1965 and 2024, using data from Scopus to analyse with tools like Microsoft Excel, BiblioMagika, OpenRefine, and VOSviewer. The findings discover that Kahneman’s (2003) paper, “Maps of Bounded Rationality: Psychology for Behavioural Economics” is the most highly cited document. This paper also identifies five key research clusters: Substance use and behavioural economics, decision-making, behavioural biases, health interventions, and alcohol-related behaviours. James G. Murphy is the most prolific author with 54 publications, while Warren K. Bickel is the most influential with 4018 citations. The United States emerged as the leading contributor with 1012 publications. This paper highlights the significant growth and interdisciplinary nature of behavioural economics, its applications in public health and policymaking, and the need for more research in diverse cultural and regional contexts.

Triangulating decision-making via choices, eye fixations, and reaching trajectories

2025-06-18

Geoffrey Fisher | Organizational Behavior and Human Decision Processes

Reward Choices: Experimental Evidence on Cognitive Task Performance

2025-06-17

Liliana Dewaele , Eddy Cardinaels , Alexandra Van den Abbeele | European Accounting Review

Perception of Cognitive Biases in Decision-Making Scale (PCBDM-S): development and initial validation of a self-report measure for assessing cognitive bias perception

2025-06-17

Tuğba Ay , Ali Özdemir | Current Psychology

Economic Analysis of Behavior under Risk and Uncertainty

2025-06-16

| World Scientific lecture notes in economics and policy

Does regret affect productivity and decision making? Evidence from lab experiments.

2025-06-16

Angela Doku , Camila Galindo , Chien‐Yu Lai | AEA Randomized Controlled Trials

Does regret affect productivity and decision making? Evidence from lab experiments.

2025-06-16

Angela Doku , Camila Galindo , Chien‐Yu Lai | AEA Randomized Controlled Trials

BEHAVIORAL ECONOMICS IN PUBLIC POLICY: A REVIEW OF NUDGE-BASED INTERVENTIONS AND ECONOMIC OUTCOMES

2025-06-15

Dadi Kuswandi , Radi Sahara , Sri Wulan Windu Ratih +1 more | Jurnal Ekonomi dan Manajemen

This study provides a systematic literature review on the application of behavioral economics, particularly the nudge theory, in shaping public policy and influencing economic outcomes. As traditional economic models assume … This study provides a systematic literature review on the application of behavioral economics, particularly the nudge theory, in shaping public policy and influencing economic outcomes. As traditional economic models assume rational decision-making, behavioral approaches challenge this by highlighting systematic biases, heuristics, and cognitive limitations in individual choices. This review synthesizes findings from 50 peer-reviewed articles and policy reports from 2010 to 2024, exploring how nudge-based interventions have been utilized in domains such as taxation, savings, energy conservation, and public health. The study categorizes nudges into types—defaults, simplifications, reminders, and social norm framing—and evaluates their effectiveness across various economic settings. The findings suggest that nudges are cost-effective, scalable, and adaptable, but their long-term impact and ethical considerations remain contested. This paper contributes to the discourse on evidence-based policymaking by offering insights into the design and evaluation of behavioral tools for public governance.

The Effectiveness of Nudging and Its Ethical Implications

2025-06-15

Leonard Dung | Bioethics

ABSTRACT Nudging consists of interventions that aim to alter behavior in a certain way by changing the presentation or framing of options, without coercion or changing economic incentives. This paper … ABSTRACT Nudging consists of interventions that aim to alter behavior in a certain way by changing the presentation or framing of options, without coercion or changing economic incentives. This paper discusses the effectiveness of nudging and the ethical implications of this effectiveness. Section 2 suggests that—if publication bias is adequately accounted for—recent comprehensive meta‐analyses as well as high‐quality experiments show that nudging is much less effective than previously assumed. Sections 3 and 4 discuss the ethical implications. I argue that the lack of effectiveness of nudging is an additional moral consideration against it. There are two reasons: First, reduced effectiveness makes nudging less cost‐effective. Second, reduced effectiveness reduces the benefits of nudging but does not, to the same degree, weaken the moral reasons speaking against nudging. However, a comprehensive assessment of the effectiveness of various forms of nudging in diverse contexts, as well as their ethical permissibility, requires further empirical and ethical research.

An empirical analysis to test the ability of multi-criteria methods to explain some behavioural anomalies

2025-06-14

Gerarda Fattoruso , Gabriella Marcarelli | Soft Computing

Time preferences and COVID-19 vaccination uptake

2025-06-14

Arthur E. Attema , Marcello Antonini , Mesfin G. Genie +2 more | The European Journal of Health Economics

Altruism and Social Discounting in Children

2025-06-13

Michiko Sorama , Masato Ito , Richard Yi +3 more | The Psychological Record

Disjunction and Possibility

2025-06-13

Matthew Mandelkern | Philosophical Perspectives

ABSTRACT I explore constructions which contain an embedded disjunction or , which is interpreted as , where is a possibility modal whose flavor is epistemic, circumstantial, or deontic. I show … ABSTRACT I explore constructions which contain an embedded disjunction or , which is interpreted as , where is a possibility modal whose flavor is epistemic, circumstantial, or deontic. I show that no extant theory can account for these interpretations. I argue that the best way to do so is with a theory on which or simply means . In addition to accounting for the novel cases I discuss, this theory explains both wide‐ and narrow‐scope free choice inferences, in a similar way to the theories of Zimmermann (2000), Geurts (2005), and Goldstein (2019) which it builds on. It also accounts for recent observations about the relation between disjunction and possibility from Degano et al. (2025) and Feinmann (2023).

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