In many real-world gambles, a non-trivial amount of time passes before the uncertainty is resolved but after a choice is made. An individual may have a preference between gambles with identical probability distributions over final outcomes if they differ in the timing of resolution of uncertainty. In this domain, utility consists not only of the consumption of outcomes, but also the psychological utility induced by an unresolved gamble. We term this utility anxiety. Since a reflective decision maker may want to (...) include anxiety explicitly in analysis of unresolved lotteries, a multiple-outcome model for evaluating lotteries with delayed resolution of uncertainty is developed. The result is a rank-dependent utility representation (e.g., Quiggin, 1982), in which period weighting functions are related iteratively. Substitution rules are proposed for evaluating compound temporal lotteries. The representation is appealing for a number of reasons. First, probability weights can be interpreted as the cognitive attention allocated to certain outcomes. Second, the model disaggregates strength of preference from temporal risk aversion and thus provides some insight into the old debate about the relationship between von Neumann–Morgenstern utility functions and strength of preference value functions. (shrink)

Several decision rules, including the minimax regret rule, have been posited to suggest optimizing strategies for an individual when neither objective nor subjective probabilities can be associated to the various states of the world. These all share the shortcoming of focusing only on extreme outcomes. This paper suggests an alternative approach of ‘tempered regrets’ which may more closely replicate the decision process of individuals in those situations in which avoiding the worst outcome tempers the loss from not achieving the best (...) outcome. The assumption of total ignorance of the probabilities associated with the various states is maintained. Applications and illustrations from standard neoclassical theory are discussed. (shrink)

Distortions in memory impose important bounds on rationality but have been largely disregarded in economics. While it is possible to learn, it is more difficult, and sometimes impossible, to unlearn. This retention effect lowers individual utility directly or via reduced productivity, and adds costs to principal-agent relationships. The engraving effect states that the more one tries to forget a piece of information the more vivid it stays in memory, leading to a paradoxical outcome. The effects are based on, and are (...) supported by, psychological experiments, and it is shown that they are relevant in many economic situations and beyond. (shrink)

It is a familiar argument that advocates accommodating the so-called paradoxes of decision theory by abandoning the “independence” postulate. After all, if we grant that choice reveals preference, the anomalous choice patterns of the Allais and Ellsberg problems violate postulate P2 of Savage's system. The strategy of making room for new preference patterns by relaxing independence is adopted in each of the following works: Samuelson, Kahneman and Tversky's “Prospect Theory”, Allais and Hagen, Fishburn, Chew and MacCrimmon, McClennen, and in closely (...) argued essays by Machina. (shrink)

If one is an egalitarian, what should one want to equalize? Opportunities or outcomes? Resources or welfare? These positions are usually conceived to be very different. I argue in this paper that the distinction is misconceived: the only coherent conception of resource equality implies welfare equality, in an appropriately abstract description of the problem. In this section, I motivate the program which the rest of the paper carries out.

It is a platitude among decision theorists that agents should choose their actions so as to maximize expected value. But exactly how to define expected value is contentious. Evidential decision theory (henceforth EDT), causal decision theory (henceforth CDT), and a theory proposed by Ralph Wedgwood that this essay will call benchmark theory (BT) all advise agents to maximize different types of expected value. Consequently, their verdicts sometimes conflict. In certain famous cases of conflict—medical Newcomb problems—CDT and BT seem to get (...) things right, while EDT seems to get things wrong. In other cases of conflict, including some recent examples suggested by Andy Egan, EDT and BT seem to get things right, while CDT seems to get things wrong. In still other cases, EDT and CDT seems to get things right, while BT gets things wrong. It's no accident, this essay claims, that all three decision theories are subject to counterexamples. Decision rules can be reinterpreted as voting rules, where the voters are the agent's possible future selves. The problematic examples have the structure of voting paradoxes. Just as voting paradoxes show that no voting rule can do everything we want, decision-theoretic paradoxes show that no decision rule can do everything we want. Luckily, the so-called “tickle defense” establishes that EDT, CDT, and BT will do everything we want in a wide range of situations. Most decision situations, this essay argues, are analogues of voting situations in which the voters unanimously adopt the same set of preferences. In such situations, all plausible voting rules and all plausible decision rules agree. (shrink)

The devices with which experimental economists account for and justify their own and their opponents’ views are investigated by examining transcripts of interviews with two participants in experimental economics. The earlier investigations of natural scientists’ discourse provide material for comparisons. The results suggest that in assessing an opponent’s deviating view experimentalists in economics can be more cautious than natural scientists to characterize their opponents as influenced by personal and social factors. Indeed, they seem to admit that to some extent both (...) their own and their opponents’ behavior involves these influences. Regarding the development of disputes, the respondents constructed accounts where general optimism concerning the ability of empirical arguments to resolve disputes was linked with an idea of dialogues between theorists and experimentalists as vehicles of progress. (shrink)

We examine how opinion on a controversial real-world issue shifts as a function of reading relevant arguments and engaging in a specific mental simulation about a future, fictional state of affairs involving the target issue. Individuals thought either counterfactually about a future event (“if only X had not happened …”) or semifactually about it (“even if X had not happened …”). In Experiment 1, as expected, individuals became more in favour of a course of action (the electronic tagging of children) (...) after reading relevant supporting arguments. They also became more in favour after they thought counterfactually how a negative future event could have been avoided if only electronic tagging had not been banned some years earlier. The effects of argument relevance and type of mental simulation were additive. Using a similar procedure but a different target issue (whether the UK should join the Economic Monetary Union), Experiment 2 confirmed that the type of mental simulation exerts a substantial effect on the impact of relevant arguments. Much weaker effects arose when the mental simulation was not relevant to the target issue. We set and discuss our results in terms of dual-processing theory. (shrink)

The various behavioral disciplines model human behavior in distinct and incompatible ways. Yet, recent theoretical and empirical developments have created the conditions for rendering coherent the areas of overlap of the various behavioral disciplines. The analytical tools deployed in this task incorporate core principles from several behavioral disciplines. The proposed framework recognizes evolutionary theory, covering both genetic and cultural evolution, as the integrating principle of behavioral science. Moreover, if decision theory and game theory are broadened to encompass other-regarding preferences, they (...) become capable of modeling all aspects of decision making, including those normally considered “psychological,” “sociological,” or “anthropological.” The mind as a decision-making organ then becomes the organizing principle of psychology. (Published Online April 27 2007) Key Words: behavioral game theory; behavioral science; evolutionary theory; experimental psychology; gene-culture coevolution; rational actor model; socialization. (shrink)

This is a comprehensive anthology of works concerning the nature of economics as a science, including classic texts and essays exploring specific branches and schools of economics. Apart from the classics, most of the selections in the third edition are new, as are the introduction and bibliography. No other anthology spans the whole field and offers a comprehensive introduction to questions about economic methodology.

This article proposes a new theory of rational decision, distinct from both causal decision theory (CDT) and evidential decision theory (EDT). First, some intuitive counterexamples to CDT and EDT are presented. Then the motivation for the new theory is given: the correct theory of rational decision will resemble CDT in that it will not be sensitive to any comparisons of absolute levels of value across different states of nature, but only to comparisons of the differences in value between the available (...) options within states of nature; however, the correct theory will also resemble EDT in that it will rely on conditional probabilities (not unconditional probabilities). The new theory gives a prominent role to the notion of a “benchmark” for each state of nature, by comparison with which the value of the available options in that state of nature are measured, and so it has been called the Benchmark Theory (BT). It is argued that BT gives the right verdict on the cases that seem to be counterexamples to CDT and EDT. Finally, some objections to BT are considered and answered. (shrink)

The notion of bounded rationality has recently gained considerable popularity in the behavioural and social sciences. This article surveys the different usages of the term, in particular the way ‘anomalosus’ behavioural phenomena are elicited, how these phenomena are incorporated in model building, and what sort of new theories of behaviour have been developed to account for bounded rationality in choice and in deliberation. It also discusses the normative relevance of bounded rationality, in particular as a justifier of non‐standard reasoning and (...) deliberation heuristics. For each of these usages, the overview discusses the central methodological problems. (shrink)

This paper generalizes the simple regret model by Bell in Operations Research 30(5), 961-981 and Loomes and Sugden in The Economic Journal 92(368), 805-824 to cope with the situation in which decision outcomes are multi-attributed. We propose a model that combines the simple regret model for ex ante preferences and the additive difference representation for ex post preferences. We first present a necessary and sufficient axiomatization of our model in Savage’s framework. The proposed model is composed of three types of (...) functions. One is a value function for each attribute. The others are attribute-dependent and holistic regret-rejoicing functions that capture trade-offs among value-differences of chosen and forgone outcomes for each attribute and among all attributes, respectively. We then provide constructive procedures for those functions and methods for consistency checks of the procedures. We, finally, conduct an experiment to estimate those functions in the two attributes case by means of the constructive procedure and give an application of the model and our findings. (shrink)

This paper aims to address the question of how one ought to choose when one is uncertain about what outcomes will result from one’s choices, but when one can nevertheless assign probabilities to the different possible outcomes. These choices are commonly referred to as choices (or decisions) under risk. I assume in this paper that one ought to make instrumentally rational choices—more precisely, one ought to adopt suitable means to one’s morally permissible ends. Expected utility (EU) theory is generally accepted (...) as a normative theory of rational choice under risk, or, more specifically, as a theory of instrumental rationality. According to EU theory, when faced with a decision under risk, one ought to rank one’s options (from least to most choiceworthy) according to their EU and one ought to choose whichever option carries the greatest EU (or one of them in the event that several alternatives are tied). The EU of an option is a probability-weighted sum of each of its possible utilities. In this paper, I argue that EU theory is not the correct theory of instrumental rationality. In its place, I argue for a new theory of instrumental rationality, namely expected comparative utility (ECU) theory. I first show that for any choice option, a, and for any state of the world, G, the measure of the choiceworthiness of a in G is the comparative utility of a in G—that is, the difference in utility, in G, between a and whichever alternative to a carries the greatest utility in G. On the basis of this principle, I then argue, roughly speaking, that for any agent, S, faced with any decision under risk, S ought to rank her options (in terms of how choiceworthy they are) according to their ECU and S ought to choose whichever option carries the greatest ECU (or one of them in the event that several alternatives are tied). For any option, a, a’s ECU is a probability‐weighted sum of a’s comparative utilities across the various possible states of the world. In this paper, I show that in some commonplace decisions under risk, ECU theory delivers different verdicts from those of EU theory. (shrink)

Research in recent years suggests that fairness concerns could mitigate hold-up problems. In this study, we report theoretical analysis and experimental evidence on an opposite possibility: that fairness concerns could also induce hold-up problems. In our setup, hold-up problems will not occur with purely self-interested agents, but theoretically could be induced by demand for distributional fairness among agents without sufficiently strong counteracting factors such as intention-based reciprocity. We observe a widespread occurrence of hold-up in our experiment. Relationship-specific investments occurred less (...) than half of the time, resulting in significant inefficiencies. Moreover, whenever a relationship-specific investment was made: (a) it was typically not reciprocated by the partner; (b) nor did the investor’s offers at the bargaining stage exhibit expectations for reciprocity. Consequently, the partner extracted all the additional expected payoff from relationship-specific investments. Further experimentation suggested that our results were driven by a fundamental lack of intention-based reciprocity in fairness concerns, rather than self-serving bias. (shrink)

We present experimental evidence that supports the thesis :602–625, 2015, Br J Philos Sci 70:77–102, 2019; Bradley in Decisions theory with a human face, Cambridge University Press, Cambridge, 2017; Goldschmidt and Nissan-Rozen in Synthese 198:7553–7575, 2021) that people might positively or negatively desire risky prospects conditional on only some of the prospects’ outcomes obtaining. We argue that this evidence has important normative implications for the central debate in normative decision theory between two general approaches on how to rationalize several common (...) patterns of preference, which are ruled out as irrational by orthodox decision theory, namely the re-individuation approach and the non-expected utility approach. (shrink)

The basic axioms or formal conditions of decision theory, especially the ordering condition put on preferences and the axioms underlying the expected utility formula, are subject to a number of counter-examples, some of which can be endowed with normative value and thus fall within the ambit of a philosophical reflection on practical rationality. Against such counter-examples, a defensive strategy has been developed which consists in redescribing the outcomes of the available options in such a way that the threatened axioms or (...) conditions continue to hold. We examine how this strategy performs in three major cases: Sen's counterexamples to the binariness property of preferences, the Allais paradox of EU theory under risk, and the Ellsberg paradox of EU theory under uncertainty. We find that the strategy typically proves to be lacking in several major respects, suffering from logical triviality, incompleteness, and theoretical insularity. To give the strategy more structure, philosophers have developed “principles of individuation”; but we observe that these do not address the aforementioned defects. Instead, we propose the method of checking whether the strategy can overcome its typical defects once it is given a proper theoretical expansion. We find that the strategy passes the test imperfectly in Sen's case and not at all in Allais's. In Ellsberg's case, however, it comes close to meeting our requirement. But even the analysis of this more promising application suggests that the strategy ought to address the decision problem as a whole, rather than just the outcomes, and that it should extend its revision process to the very statements it is meant to protect. Thus, by and large, the same cautionary tale against redescription practices runs through the analysis of all three cases. A more general lesson, simply put, is that there is no easy way out from the paradoxes of decision theory. (shrink)

By the late 1990s, several converging trends in economics, psychology, and neuroscience had set the stage for the birth of a new scientific field known as “neuroeconomics”. Without the availability of an extensive variety of experimental designs for dealing with individual and social decision-making provided by experimental economics and psychology, many neuroeconomics studies could not have been developed. At the same time, without the significant progress made in neuroscience for grasping and understanding brain functioning, neuroeconomics would have never seen the (...) light of day. The paper is an overview of the main significant advances in the knowledge of brain functioning by neuroscience that have contributed to the emergence of neuroeconomics and its rise over the past two decades. These advances are grouped over three non-independent topics referred to as the “emo-rational” brain, “social” brain, and “computational” brain. For each topic, it emphasizes findings considered as critical to the birth and development of neuroeconomics while highlighting some of prominent questions about which knowledge should be improved by future research. In parallel, it shows that the boundaries between neuroeconomics and several recent sub-fields of cognitive neuroscience, such as affective, social, and more generally, decision neuroscience, are rather porous. (shrink)

This paper argues that instrumental rationality is more permissive than expected utility theory. The most compelling instrumentalist argument in favour of separability, its core requirement, is that agents with non-separable preferences end up badly off by their own lights in some dynamic choice problems. I argue that once we focus on the question of whether agents’ attitudes to uncertain prospects help define their ends in their own right, or instead only assign instrumental value in virtue of the outcomes they may (...) lead to, we see that the argument must fail. Either attitudes to prospects assign non-instrumental value in their own right, in which case we cannot establish the irrationality of the dynamic choice behaviour of agents with non-separable preferences. Or they don’t, in which case agents with non-separable preferences can avoid the problematic choice behaviour without adopting separable preferences. (shrink)

It is often suggested that when opinions differ among individuals in a group, the opinions should be aggregated to form a compromise. This paper compares two approaches to aggregating opinions, linear pooling and what I call opinion agglomeration. In evaluating both strategies, I propose a pragmatic criterion, No Regrets, entailing that an aggregation strategy should prevent groups from buying and selling bets on events at prices regretted by their members. I show that only opinion agglomeration is able to satisfy the (...) demand. I then proceed to give normative and empirical arguments in support of the pragmatic criterion for opinion aggregation, and that ultimately favor opinion agglomeration. (shrink)

A decision maker (DM) selects a project from a set of alternatives with uncertain productivity. After the choice, she observes a signal about productivity and decides how much effort to put in. This paper analyzes the optimal decision problem of the DM who rationally filters information to deal with her post-decision cognitive dissonance. It is shown that the optimal effort level for a project can be affected by unchosen projects in her choice set, and the nature of the choice set-dependence (...) is determined by the signal structure. Some comparative statics of choice set-dependence is also provided. Finally, based on the results, the optimal choice set design is also explored. This paper offers a simple framework to explain the experimental finding in psychology that people’s effort level for a project can be enhanced when the project is chosen by themselves rather than by others. (shrink)

In Richard Bradley’s book, Decision Theory with a Human Face, we have selected two themes for discussion. The first is the Bolker-Jeffrey theory of decision, which the book uses throughout as a tool to reorganize the whole field of decision theory, and in particular to evaluate the extent to which expected utility theories may be normatively too demanding. The second theme is the redefinition strategy that can be used to defend EU theories against the Allais and Ellsberg paradoxes, a strategy (...) that the book by and large endorses, and even develops in an original way concerning the Ellsberg paradox. We argue that the BJ theory is too specific to fulfil Bradley’s foundational project and that the redefinition strategy fails in both the Allais and Ellsberg cases. Although we share Bradley’s conclusion that EU theories do not state universal rationality requirements, we reach it not by a comparison with BJ theory, but by a comparison with the non-EU theories that the paradoxes have heuristically suggested. (shrink)

John Dewey and Ludwig Wittgenstein offer devastating critiques of the dominant model of human action that each inherited in their own time. Dewey, very early in his philosophical career, ostensibly put the stimulus–response mechanical understanding of action to rest with his “reflex-arc” concept article. Wittgenstein famously redescribed action as moves within language games that interconnect to constitute an interpretively open-ended form of life. In each case, these fundamental insights serve as heuristics, guiding our intellectual activity with regard to understanding our (...) practices, and as reminders in approaching problems. Several scholars have interpreted Dewey and Wittgenstein as allies in a grand project of... (shrink)

Orthodox expected utility theory imposes too stringent restrictions on what attitudes to risk one can rationally hold. Focusing on a life-and-death gamble, I identify as the main culprit the theory’s Linearity property, according to which the utility of a particular change in the risk of a bad outcome is independent of the original level of risk. Finally, I argue that a recent non-standard Bayesian decision theory, that does not have this property, handles risky gambles better than the orthodox theory.

In this paper, I examine the decision-theoretic status of risk attitudes. I start by providing evidence showing that the risk attitude concepts do not play a major role in the axiomatic analysis of the classic models of decision-making under risk. This can be interpreted as reflecting the neutrality of these models between the possible risk attitudes. My central claim, however, is that such neutrality needs to be qualified and the axiomatic relevance of risk attitudes needs to be re-evaluated accordingly. Specifically, (...) I highlight the importance of the conditional variation and the strengthening of risk attitudes, and I explain why they establish the axiomatic significance of the risk attitude concepts. I also present several questions for future research regarding the strengthening of risk attitudes. (shrink)

Positive and negative feelings were central to the development of economics, especially in utility theory in classical economics. While neoclassical utility theory ignored feelings, behavioral economics more recently reintroduced feelings in utility theory. Beyond feelings, economic theorists use full-fledged specific emotions to explain behavior that otherwise could not be understood or they study emotions out of interest for the emotion itself. While some analyses display a strong overlap between psychological thinking and economic modelling, in most cases there is still a (...) large gap between economic and psychological approaches to emotion research. Ways how to reduce this gap are discussed. (shrink)

In this paper, I argue for a new normative theory of rational choice under risk, namely expected comparative utility (ECU) theory. I first show that for any choice option, a, and for any state of the world, G, the measure of the choiceworthiness of a in G is the comparative utility (CU) of a in G—that is, the difference in utility, in G, between a and whichever alternative to a carries the greatest utility in G. On the basis of this (...) principle, I then argue that for any agent, S, faced with any decision under risk, S should rank his or her decision options (in terms of how choiceworthy they are) according to their comparative expected comparative utility (CECU) and should choose whichever option carries the greatest CECU. For any option, a, a’s CECU is the difference between its ECU and that of whichever alternative to a carries the greatest ECU, where a’s ECU is a probability‐weighted sum of a’s CUs across the various possible states of the world. I lastly demonstrate that in some ordinary decisions under risk, ECU theory delivers different verdicts from those of standard decision theory. (shrink)

Daniel Ellsberg presented in Ellsberg (The Quarterly Journal of Economics 75:643–669, 1961) various examples questioning the thesis that decision making under uncertainty can be reduced to decision making under risk. These examples constitute one of the main challenges to the received view on the foundations of decision theory offered by Leonard Savage in Savage (1972). Craig Fox and Amos Tversky have, nevertheless, offered an indirect defense of Savage. They provided in Fox and Tversky (1995) an explanation of Ellsberg’s two-color problem (...) in terms of a psychological effect: ambiguity aversion . The ‘comparative ignorance’ hypothesis articulates how this effect works and explains why it is important to an understanding of the typical pattern of responses associated with Ellsberg’s two-color problem. In the first part of this article we challenge Fox and Tversky’s explanation. We present first an experiment that extends Ellsberg’s two-color problem where certain predictions of the comparative ignorance hypothesis are not confirmed. In addition the hypothesis seems unable to explain how the subjects resolve trade-offs between security and expected pay-off when vagueness is present. Ellsberg offered an explanation of the typical behavior elicited by his examples in terms of these trade-offs and in section three we offer a model of Ellsberg’s trade-offs. The model takes seriously the role of imprecise probabilities in explaining Ellsberg’s phenomenon. The so-called three-color problem was also considered in Fox and Tversky (1995). We argue that Fox and Tversky’s analysis of this case breaks a symmetry with their analysis of the two-color problem. We propose a unified treatment of both problems and we present a experiment that confirms our hypothesis. (shrink)

In the recent literature on episodic memory, there has been increasing recognition of the need to provide an account of its adaptive function. In this context, it is sometimes argued that episodic memory is critical for certain forms of decision making about the future. We criticize existing accounts that try to give episodic memory a role in decision making, before giving a novel such account of our own. This turns on the thought of a link between episodic memory and the (...) emotion of regret. We discuss how both experienced and anticipated regret can have a distinctive influence on decision making, and argue that the ability to recollect past events in episodic memory underpins the capacity to engage in the sophisticated types of mental time travel recruited in experiencing and anticipating regret. (shrink)

This paper explores the different ways in which conditionals can be carriers of good and bad news. I suggest a general measure of the desirability of conditionals, and use it to explore the different ways in which conditionals can have news value. I conclude by arguing that the desirability of a counterfactual conditional cannot be reduced to the desirability of factual propositions.

Over the last decade, neuroeconomic research has attracted increasing attention by economic modellers and methodologists. In this paper, I examine five issues about neuroeconomic modelling and methodology that have recently been subject to considerable controversy. For each issue, I explicate and appraise prominent neuroeconomists' findings, focusing on those that are claimed to directly inform economic theorizing. Moreover, I assess often-made assertions concerning how neuroeconomic research putatively advances the economic modelling of choice. In doing so, I combine review and critical arguments (...) to provide a methodological evaluation of neuroeconomists' contributions. (shrink)

Replying to Queen Elizabeth II who in November 2008 asked why so few economists had warned about the emerging financial crisis, a group of eminent economists of the British Academy, claimed that while this failure had many causes, the most important was principally a failure of the collective imagination of many bright people, to understand the risks to the system as a whole. The paper suggests that this failure is due also to the still heavy influence of the paradigm of (...) rational expectations, that did not provide the intellectual tools to grasp the signs of the impending financial crisis. The paper explores the development of Muth’s rational expectations hypothesis and the parallel development of Simon’s idea of bounded rationality—two opposite views about economic behavior that originated in the same context, during the early 1960s at Carnegie Mellon. It is shown that the latter, while marginalized for decades from the core economic ideas, generated a wide development in cognitive psychology, problem solving and experimental economics that grew up in the last decades and now permit a more profound analysis of human behavior in economic and organizational contexts, that can be the seed of a new thinking in economics. The challenge for economists is to use this new toolbox to incorporate in their models real human behaviors, getting out from the economy of wishful thinking. (shrink)

The desirability of what actually occurs is often influenced by what could have been. Preferences based on such value dependencies between actual and counterfactual outcomes generate a class of problems for orthodox decision theory, the best-known perhaps being the so-called Allais Paradox. In this paper we solve these problems by extending Richard Jeffrey's decision theory to counterfactual prospects, using a multidimensional possible-world semantics for conditionals, and showing that preferences that are sensitive to counterfactual considerations can still be desirability maximising. We (...) end the paper by investigating the conditions necessary and sufficient for a desirability function to be an expected utility. It turns out that the additional conditions imply highly implausible epistemic principles. (shrink)

Proponents of neuroeconomics often argue that better knowledge of the human neural architecture enables economists to improve standard models of choice. In their view, these improvements provide compelling reasons to use neural findings in constructing and evaluating economic models. In a recent article, I criticized this view by pointing to the trade-offs between the modeling desiderata valued by neuroeconomists and other economists, respectively. The present article complements my earlier critique by focusing on three modeling desiderata that figure prominently in economic (...) and neuroeconomic modeling. For each desideratum, I examine findings that neuroeconomists deem to be especially relevant for economists and argue that neuroeconomists have failed to substantiate their calls to use these findings in constructing and evaluating economic models. In doing so, I identify methodological and evidential constraints that will continue to hinder neuroeconomists’ attempts to improve such models. Moreover, I draw on the literature on scientific modeling to advance the ongoing philosophical discussion regarding the prospects of interdisciplinary models of choice. (shrink)

Social epistemology is autonomous: When applied to the same evidential situations, the principles of social rationality and the principles of individual rationality sometimes recommend inconsistent beliefs. If we stipulate that reasoning rationally from justified beliefs to a true belief is normally sufficient for knowledge, the autonomy thesis implies that some knowledge is essentially social. When the principles of social and individual rationality are applied to justified evidence and recommend inconsistent beliefs and the belief endorsed by social rationality is true, then (...) that true belief would be an instance of social knowledge but not individual knowledge. (shrink)

Regret and disappointment have in common the fact that they are experienced when the outcome of a decision is unfavourable: They both concern “what might have been”, had things been different. However, some regret and disappointment theorists regard the differences between these emotions as important, arguing that they differ with respect to the conditions under which they are felt, and how they affect decision making. The goal of the present research was to examine whether and how these emotions also differ (...) with respect to the way in which they are experienced. Participants were asked torecall aninstance of intense regret or disappointment andto indicate what they felt, thought, felt like doing, did, and were motivated to do during this experience (cf. Roseman, Wiest, & Swartz, 1994). Significant differences between regret and disappointment were found in every category. These differences were most pronounced for “action tendencies” (what participants felt like doing) and “emotivations” (what they were motivated to do). These results suggest that the two emotions have differential implications for future behaviour. (shrink)

Why does performing certain tasks cause the aversive experience of mental effort and concomitant deterioration in task performance? One explanation posits a physical resource that is depleted over time. We propose an alternative explanation that centers on mental representations of the costs and benefits associated with task performance. Specifically, certain computational mechanisms, especially those associated with executive function, can be deployed for only a limited number of simultaneous tasks at any given moment. Consequently, the deployment of these computational mechanisms carries (...) an opportunity cost – that is, the next-best use to which these systems might be put. We argue that the phenomenology of effort can be understood as the felt output of these cost/benefit computations. In turn, the subjective experience of effort motivates reduced deployment of these computational mechanisms in the service of the present task. These opportunity cost representations, then, together with other cost/benefit calculations, determine effort expended and, everything else equal, result in performance reductions. In making our case for this position, we review alternative explanations for both the phenomenology of effort associated with these tasks and for performance reductions over time. Likewise, we review the broad range of relevant empirical results from across sub-disciplines, especially psychology and neuroscience. We hope that our proposal will help to build links among the diverse fields that have been addressing similar questions from different perspectives, and we emphasize ways in which alternative models might be empirically distinguished. (shrink)

A central question in many debates on paternalism is whether a decision analyst can ever go against the stated preference of a client, even if merely intending to improve the decisions for the client. Using four gedanken-experiments, this paper shows that this central question, so cleverly and aptly avoided by libertarian paternalism (nudge), cannot always be avoided. The four thought experiments, while purely hypothetical, serve to raise and specify the critical arguments in a maximally clear and pure manner. The first (...) purpose of the paper is, accordingly, to provide a litmus test on the readers’ stance on paternalism. We thus also survey and organize the various stances in the literature. The secondary purpose of this paper is to argue that paternalism cannot always be avoided and consumer sovereignty cannot always be respected. However, this argument will remain controversial. (shrink)

Recently proposed models of risky choice imply systematic violations of transitivity of preference. This study explored whether people show the predicted intransitivity of the two models proposed to account for the certainty effect in Allais paradoxes. In order to distinguish “true” violations from those produced by “error,” a model was fit in which each choice can have a different error rate and each person can have a different pattern of preferences that need not be transitive. Error rate for a choice (...) is estimated from preference reversals between repeated presentations of the same choice. Results showed that few people repeated intransitive patterns. We can retain the hypothesis that all participants were transitive. (shrink)

In this paper we experimentally investigate the disparity between willingness-to-accept (WTA) and willingness-to-pay (WTP) for risky lotteries. The direction of the income effect is reversed by endowing subjects with the highest price of a lottery when asking the WTP question. Our results show that the income effect is too small to be the only source of the disparity. Since the disparity concentrates on a subsample of subjects, parametric and nonparametric tests of the WTA-WTP ratio may lead to contradictory results. The (...) disparity is significantly reduced when background risk is introduced. That is, putting subjects always into a risky position could improve the contingent valuation method, which is often concerned with the assessment of risky situations such as health risks, automobile safety, etc. (shrink)

Incorporation of the behavioral issues of the decision maker (DM) is among the aspects that each Multicriteria Decision Making (MCDM) method implicitly or explicitly takes into account. As postulated by regret theory, the feelings of regret and rejoice are among the behavioral issues associated with the entire decision making process. Within the context of MCDM, the DM may feel regret, when the chosen alternative is compared with another one having at least one better criterion value. PROMETHEE II is a widely (...) known MCDM method that makes no explicit incorporation of regret attitude of the DM. In this paper, we elaborate on the applicability of regret theory to MCDM context. In particular, we investigate the findings of regret theory and explore the parallel between regret theory and PROMETHEE II method. Relying on the concepts of regret theory, we demonstrate how a decision that is made using a PROMETHEE II based outranking method conforms to the regret attitude of the DM. (shrink)

Three experiments investigated the contrasting predictions of the evolutionary and decision-theoretic approaches to deontic reasoning. Two experiments embedded a hazard management (HM) rule in a social contract scenario that should lead to competition between innate modules. A 3rd experiment used a pure HM task. Threatening material was also introduced into the antecedent, p, of a deontic rule, if p then must q. According to the evolutionary approach, more HM responses (Cosmides & Tooby, 2000) are predicted when p is threatening, whereas (...) decision theory predicts fewer. All 3 experiments were consistent with decision theory. Other theories are discussed, and it is concluded that they cannot account for the behavior observed in these experiments. (shrink)

A central point of debate over environmental policies concerns how future costs and benefits should be assessed. The most commonly used method for assessing the value of future costs and benefits is economic discounting. One often-cited justification for discounting is uncertainty. More specifically, it is risk aversion coupled with the expectation that future prospects are more risky. In this paper I argue that there are at least two reasons for disputing the use of risk aversion as a justification for discounting (...) when dealing with longterm decisions, one technical and one ethical. Firstly, I argue that technically, it implies an inconsistency between theory and practice. And secondly, I argue that discounting for uncertainty relies on a form of individualism which, while reasonable in standard microeconomic theory where an agent chooses how to spread her own consumption over her own lifetime, is inappropriate in the context of intergenerational social decisions. (shrink)

(2013). Why humans are (sometimes) less rational than other animals: Cognitive complexity and the axioms of rational choice. Thinking & Reasoning: Vol. 19, No. 1, pp. 1-26. doi: 10.1080/13546783.2012.713178.