Individual differences on a variety of framing and conjunction problems were examined in light of Slovic and Tversky's (1974) understanding/acceptance principle-that more reflective and skilled reasoners are more likely to affirm the axioms that define normative reasoning and to endorse the task construals of informed experts. The predictions derived from the principle were confirmed for the much discussed framing effect in the Disease Problem and for the conjunction fallacy on the Linda Problem. Subjects of higher cognitive ability were disproportionately likely (...) to avoid each fallacy. Other framing problems produced much more modest levels of empirical support. It is conjectured that the varying patterns of individual differences are best explained by two-process theories of reasoning (e.g. Evans, 1984, 1996; Sloman, 1996) conjoined with the assumption that the two processes differentially reflect interactional and analytic intelligence. (shrink)

Using a large sample of retail investors as well as experimental data we find that risk and ambiguity aversion are positively correlated. We provide evidence that a common link is decision mode: intuitive thinkers tolerate more risk and ambiguity than effortful reasoners. One interpretation is that intuitive thinking confers an advantage in risky or ambiguous situations. We present supporting lab and field evidence that intuitive thinkers outperform others in uncertain environments. Finally, we find that risk and ambiguity aversion vary with (...) individual characteristics and wealth. The wealthy are less risk averse but more ambiguity averse, which has implications for financial puzzles. (shrink)