When making inferences about similar others, people anchor and adjust away from themselves. However, research on relational self theory suggests the possibility of using knowledge about others as an anchor when they are more similar to a target. We investigated whether social inferences are made on the basis of significant other knowledge through an anchoring and adjustment process, and whether anchoring on a significant other is more effortful than anchoring on the self. Participants answered questions about their likes and habits, (...) as well as the likes and habits of a significant other, a target similar to their significant other, and a yoked control. We found that prediction differences between the significant other and similar target led to longer response times, and we found the opposite effect for self and target differences, suggesting anchoring and adjustment from the significant other rather than the self. These effects were moderated by the source-relative salience of the dimension being evaluated. The evidence was mixed with respect to the question of whether anchoring on a significant other is more effortful than anchoring on the self. (shrink)

According to normative decision theory there exists a principle of procedure invariance which states that a decision maker's preference order should remain the same, independently of which response mode is used. For example, the decision maker should express the same preference independently of whether he or she has to judge or decide. Nevertheless, previous research in behavioral decision making has suggested that judgments and choices yield different preference orders in both the risky and the riskless domain. In the latter, the (...) prominence effect has been demonstrated. The main purpose of the present series of experiments was to test cognitive explanations which account for the prominence effect. One of the explanations provided a psychological account based primarily on decision-strategy compatibility. Two other explanations built on information structuring approaches. In the first one, the general idea was that decision makers differentiate between alternatives by value and belief restructuring. In the second approach, violations of invariance were assumed to be attributed to the information structure of the task which in many cases demand problem simplification. A prominence effect was in most experiments found for both choices and preference ratings. This finding spöke against the strategy compatibility explanation. Instead, the different forms of cognitive restructuring provided a better account. However, none of these provided a single explanation. Yet, the structure compatibility explanation appeared to be the more viable one, in particular of the relation between experimentäl manipulations and response mode outcomes. The predictions of the value-belief restructuring explanation, on the other hand, seemed to be more valid for the prominence effect found in choice than for preference ratings. (shrink)

Causal selection is the cognitive process through which one or more elements in a complex causal structure are singled out as actual causes of a certain effect. In this paper, we report on an experiment in which we investigated the role of moral and temporal factors in causal selection. Our results are as follows. First, when presented with a temporal chain in which two human agents perform the same action one after the other, subjects tend to judge the later agent (...) to be the actual cause. Second, the impact of temporal location on causal selection is almost canceled out if the later agent did not violate a norm while the former did. We argue that this is due to the impact that judgments of norm violation have on causal selection—even if the violated norm has nothing to do with the obtaining effect. Third, moral judgments about the effect influence causal selection even in the case in which agents could not have foreseen the effect and did not intend to bring it about. We discuss our findings in connection to recent theories of the role of moral judgment in causal reasoning, on the one hand, and to probabilistic models of temporal location, on the other. (shrink)

The "two-envelopes" problem has stimulated much discussion on probabilistic reasoning, but relatively little experimentation. The problem specifies two identical envelopes, one of which contains twice as much money as the other. You are given one of the envelopes and the option of keeping it or trading for the other envelope. Variables of interest include the possible amounts of money involved, what is known about the process by which the amounts of money were assigned to the envelopes, and whether you are (...) allowed to know how much money is in the envelope in hand before deciding whether to keep or trade. In an earlier study, Butler and Nickerson found that when participants were allowed to know how much was in the envelope in hand, they generally elected to trade if that amount was small relative to the range of possibilities and to keep otherwise. The present experiments showed that this propensity was independent of the amount of money in the envelopes. Participants made decisions with a strong bias for avoiding the risk of losing by trading, particularly when the amount in hand was known and large relative to the range of possible amounts, regardless of the absolute value of the gamble. The results illustrate the dependence of thinking on the context in which it occurs, and demonstrate a tendency to treat quantities that are large or small relative to a particular context in which they are encountered as though they were large or small in a more general sense. (shrink)

The notion of risk plays a central role in economics, finance, health, psychology, law and elsewhere, and is prevalent in managing challenges and resources in day-to-day life. In recent work, Duncan Pritchard (2015, 2016) has argued against the orthodox probabilistic conception of risk on which the risk of a hypothetical scenario is determined by how probable it is, and in favour of a modal conception on which the risk of a hypothetical scenario is determined by how modally close it is. (...) In this article, we use Pritchard’s discussion as a springboard for a more wide-ranging discussion of the notion of risk. We introduce three different conceptions of risk: the standard probabilistic conception, Pritchard’s modal conception, and a normalcy conception that is new (though it has some precursors in the psychological literature on risk perception). Ultimately, we argue that the modal conception is ill-suited to the roles that a notion of risk is required to play and explore the prospects for a form of pluralism about risk, embracing both the probabilistic and the normalcy conceptions. (shrink)

This study examines how ambiguity in corporate objectives affects managers’ choice between opposing sustainability and short-term profit goals. We test this question with an experiment in which we vary whether environmental sustainability is included explicitly as a strategic objective that is used for managers’ performance evaluations. Findings show that managers increase biodegradable production and correspondingly decrease short-term profit when environmental sustainability performance is explicitly incorporated within the company’s strategic objectives. Also, managers in the implicit incorporation group are more likely to (...) decrease their biodegradable production when they learn that their counterparts within the firm have chosen to decrease biodegradable production in other product lines. Further, managers in the explicit incorporation group have greater trust in senior management, and that trust mediates the negative relationship between incorporation ambiguity and the level of biodegradable production. The theoretical and practical implications of this study are discussed. (shrink)

The ratio bias—according to which individuals prefer to bet on probabilities expressed as a ratio of large numbers to normatively equivalent or superior probabilities expressed as a ratio of small numbers—has recently gained momentum, with researchers especially in health economics emphasizing the policy importance of the phenomenon. Although the bias has been replicated several times, some doubts remain about its economic significance. Our two experiments show that the bias disappears once order effects are excluded, and once salient and dominant incentives (...) are provided. This holds true for both choice and valuation tasks. Also, adding context to the decision problem does not alter this finding. No ratio bias could be found in between-subject tests either, which leads us to the conclusion that the policy relevance of the phenomenon is doubtful at best. (shrink)

Abstract It is shown that J. M. Keynes was the originator of what is called a weighted monetary value (WMV) approach to decision making under uncertainty and risk as opposed to either the expected monetary value (EMV) or subjective expected utility (SEU) approaches.

This paper presents the results of two experiments designed to test violations of Subjective Expected Utility Theory (SEUT) within a sample of Italian trade union delegates and leaders. Subjects priced risky and ambiguous prospects in the domain of gains. Risky prospects were based on games of chance, while ambiguous prospects were built on the standard Ellsberg paradox and on event lotteries whose outcomes were based either on the results of a fictional election or on the future results of the 1999 (...) European Parliamentary election in Italy and the U.K. The experiments show that, although risky prospects were priced at their expected values on average, trade union delegates and leaders did violate SEUT when assessing ambiguous prospects. Moreover, their behaviour depended on the source of uncertainty (Ellsberg paradox vs. electoral results; fictional vs. real election; Italy vs. U.K. election outcomes). We discuss the implications of these results for the economic theory of the trade union. (shrink)

This paper examines preferences among uncertain prospects when the decision maker is uneasy about his assignment of subjective probabilities. It proposes a two-stage lottery framework for the analysis of such prospects, where the first stage represents an assessment of the vagueness (ambiguity) in defining the problem's randomness and the second stage represents an assessment of the problem for each hypothesized randomness condition. Standard axioms of rationality are prescribed for each stage, including weak ordering, continuity, and strong independence. The ‘Reduction of (...) Compound Lotteries' axiom is weakened, however, so that the two lottery stages have consistent, but not collapsible, preference structures. The paper derives a representation theorem from the primitive preference axioms, and the theorem asserts that preference-consistent decisions are made as if the decision maker is maximizing a modified expected utility functional. This representation and its implications are compared to alternative decision models. Criteria for assigning the relative empirical power of the alternative models are suggested. (shrink)

This paper reviews the most common approaches that have been adopted to analyze and describe loss aversion under prospect theory. Subsequently, it is argued that loss aversion is a property of observable choice behavior and two new definitions of loss averse behavior are advocated. Under prospect theory, the new properties hold if the commonly used utility based measures of loss aversion are corrected by a probability based measure of loss aversion and their product exceeds 1. It is shown that prominent (...) parametric families of weighting functions, while successful in accommodating empirical findings on probabilistic risk attitudes, may not fit well with the theoretical implications of the new loss averse behavior conditions. (shrink)

The generalized Bayes’ rule (GBR) can be used to conduct ‘quasi-Bayesian’ analyses when prior beliefs are represented by imprecise probability models. We describe a procedure for deriving coherent imprecise probability models when the event space consists of a finite set of mutually exclusive and exhaustive events. The procedure is based on Walley’s theory of upper and lower prevision and employs simple linear programming models. We then describe how these models can be updated using Cozman’s linear programming formulation of the GBR. (...) Examples are provided to demonstrate how the GBR can be applied in practice. These examples also illustrate the effects of prior imprecision and prior-data conflict on the precision of the posterior probability distribution. (shrink)

This paper reflects on the notion of partial ambiguity. Using a framework decomposing ambiguity into distinct layers of analysis, among which are risk and model uncertainty, and allowing for different attitudes toward these layers, I show that partial ambiguity may prove less desirable than full ambiguity, even under ambiguity aversion. This observation poses difficulties for interpreting the notion of partial ambiguity in relation to the partial information available to determine the potential compositions of an ambiguous urn. Two Ellsberg-style thought experiments (...) are described to challenge the meaning of partial ambiguity further, and an alternative interpretation, based on a more ambiguous relation, is discussed. (shrink)

Evidence suggests that men are more confident and less risk averse in financial decision making. Researchers did not address how men and women respond differently to goals in financial decision situations, however. In the present study, men set more challenging personal goals and risked more resources than women in a complex financial decision task. Men did not report higher self-efficacy versus women. As expected, gender interacted with assigned goals to predict self-efficacy, risk behavior, and personal goals. Results concur with recent (...) financial decision research that suggests men and women differ in their use of externally-provided information such as assigned goals. Suggestions for future research are offered and limitations are discussed. (shrink)

Part 1 of this paper1 used the notions of equivocality and uncertainty to distinguish the situations in which managers make judgements and decisions and described in general how managers use models in these different contexts. This final second part describes in detail the three types of models managers use: formal models, stories and metaphors. It offers five propositions about how managers use the three types of model, propositions which can usefully form the basis of future empirical research.

In multi-armed bandit problems, information acquired from experimentation is valuable because it tells the agent whether to select a particular option again in the future. This article tests whether people undervalue this information because they are ambiguity averse, or have a distaste for uncertainty about the average quality of each alternative. It is shown that ambiguity averse agents have lower than optimal Gittins indexes, appearing to undervalue information from experimentation, but are willing to pay more than ambiguity neutral agents to (...) learn the true mean of the payoff distribution, appearing to overvalue objectively given information. This prediction is tested with a laboratory experiment that elicits a Gittins index and a willingness to pay on six two-armed bandits. Consistent with the predictions of ambiguity aversion, the Gittins indexes are significantly lower than optimal and willingnesses to pay are significantly higher than optimal. (shrink)

Abstract:This paper develops a framework for examining decision making about ethical issues and tests the applicability of a social contract perspective. Using two separate samples of students and salespeople, we determine that community members (salespeople) tend to judge a potentially unethical act to constitute a violation of an implicit social contract and non-community members (students) do not. Also, consistent with the emphasis on context specificity of integrative social contracts theory, situational variables influence perceptions of ethicality for the community members, but (...) do not affect the perceptions of individuals outside the community. The study finds considerable support for the use of a social contractarian perspective in the study of decision-making processes about ethical issues. (shrink)

Gambles which induce the decision-maker to experience ambiguity about the relative likelihood of events often give rise to ambiguity-seeking and ambiguity-avoidance, which imply violation of additivity and Savage's axioms. The inability of the subjective Bayesian theory to account for these empirical regularities has determined a dichotomy between normative and descriptive views of subjective probability. This paper proposes a framework within which the two perspectives can be reconciled. First, a formal definition of ambiguity is given over a continuum ranging from ignorance (...) to risk, and including ambiguous contexts as subsets. Second, it is shown that the systems of inductive logic account for the effects of ambiguity. Then, Carnap's X-system is applied as a psychological model and compared to Einhorn and Hogarth's non-normative psychological model. Finally, the implications of this research to the modeling of subjective probability judgements are discussed. (shrink)

Often in insurance decision making, there are risk factors on which the insurer has an informational advantage over the consumer. But when the insurer sets and posts a premium for the consumer to consider, the consumer can potentially use the premium as an informational cue for the loss probability, and thereby to reduce the insurer’s informational advantage. We study, by means of a behavioral model, how consumers would use the premium as an informational cue in such contexts. The belief formation (...) process in our model assumes that both prior knowledge and the premium might have an impact on the consumer’s estimate of the loss probability. Moreover, the premium impacts the estimate through an anchoring-and-adjustment process. The model potentially leads to violations of rational expectations, with which the consumer overestimates the loss probability beyond what could be inferred from the premium, given the premise that the insurer must seek to break even or earn an expected profit. Our model analysis moreover implies that the frequency of such violations is non-increasing as the premium increases. Last, the model implies a generally inverted-U relationship between insurance demand and the premium so that the demand is upward sloping at low premium levels and downward sloping at high premium levels. A pilot field study and a laboratory experiment provide robust evidence for our model implications and calibrations for its parameters. (shrink)

in Undetermined Table d’Hôte Ingar Brinck: Investigating the development of creativity: The Sahlin hypothesis 7 Linus Broström: Known unknowns and proto-second-personal address in photographic art 25 Johan Brännmark: Critical moral thinking without moral theory 33 Martin Edman: Vad är ett missförhållande? 43 Pascal Engel: Rambling on the value of truth 51 Peter Gärdenfors: Ambiguity in decision making and the fear of being fooled 75 Göran Hermerén: NIPT: Ethical aspects 89 Mats Johansson: Roboethics: What problems should be addressed and why? 103 (...) Johan Laserna: Ambivalenta bilder 113 Anna-Sofia Maurin: Metaphysical explanation 161 Kevin Mulligan: Is preference primitive? 169 John D. Norton: How does your garden grow? 181 Johannes Persson & Annika Wallin: The distinction between internal and external validity 187 Johanna Seibt: Becoming our selves 197 Paul Slovic, Robin Gregory, David Frank, and Daniel Vastfjall: Confronting the collapse of humanitarian values in foreignpolicy decision making 209 Peter Sylwan: Det eviga livet 215 Claudine Tiercelin: Chance, love and logic: Ramsey and Peirce on norms, rationality and the conduct of life 221 Epilog 257 Frank Ramsey. (shrink)