Decision Science News

SCP 2005 WINTER CONFERENCE

The Upcoming Society for Consumer Psychology SCP winter conference will be held from Thursday February 24th to Monday the 28th 2005 at the TradeWinds Island Grand Resort in St. Pete Beach, Florida.

“The Society for Consumer Psychology represents the interests of behavioral scientists in the fields of psychology, marketing, advertising, communication, consumer behavior, and other related areas. Some members of the Society are mainly interested in generating applied knowledge to solve specific marketing related problems, while others focus on generating basic knowledge to contribute to theoretical and conceptual foundations of consumer psychology. The Society encourages all members to share their knowledge and contribute to the discipline of consumer psychology as a whole through contributions in conferences, journal articles, and book chapters”. -From the Society for Consumer Psychology Home Page

To register for the winter conference go to the SCP home page and click on “Winter 2005 SCP Conference Online Registration” or click here to link directly. A preliminary program for the SCP winter conference is availbale here or at the SCP home page.

Conference Chairs:

Anne Brumbaugh, Wake Forest University Home Page
Geraldine R. Henderson, Univerity of Texas at Austin Home Page

Conference Co Chairs:

Amar Cheema, Washington University in St. Louis Home Page
Scott A. Hawkins, University of Toronto Home Page
Joydeep Srivastava, University of Maryland Home Page

BOUNDED RATIONALITY: THE ADAPTIVE TOOLBOX by Gerd Gigerenzer and Rienhard Selten.

How do real people make decisions in an uncertain world? In the book Bounded rationality: The adaptive tool box, Gigerenzer and Selten (et al.) investigate the constraints of limited information and time upon human logic and reasoning in the decision making process. The authors view Bounded Rationality neither as the optimization of limited resources under constraint nor as a study of the failings of human reasoning capability.

QUOTES:
“Visions of rationality do not respect disciplinary boundaries. Economics, psychology, animal biology, artificial intelligence, anthropology, and philosophy struggle with models of sound judgment, inference and decision making. These models evolve over time, just as the idea of rationality has a history, a present and a future (Daston 1988). Over the last centuries, models of rationality have changed when they conflicted with actual behavior, yet, at the same time, they provided prescriptions for behavior. This double role-to describe and prescribe- does not map easily onto a sharp divide between descriptive and normative models, which plays down the actual exchange between the psychological and the rational (Gigerenzer et al. 1989). Herbert Simon’s notion of bounded rationality was proposed in the mid-1950’s to connect, rather than to oppose, the rational and the psychological (Simon 1956). The aim of this book is to contribute to the process of coevolution, by inserting more psychology into rationality, and vice versa.”

“In a complex and uncertain world humans and animals make decisions under the constraints of limited knowledge, resources, and time. Yet models of rational decision making in economics, cognitive science, biology and other fields largely ignore these real constraints and instead assume agents with perfect information and unlimited time. About forty years ago Herbert Simon challenged this view with his notion of “bounded rationality”. Today, bounded rationality has become a fashionable term used for disparate views of reasoning.”

ABOUT THE AUTHORS:

Gerd Gigerenzer

Gerd Gigerenzer is Director of the Center for Adaptive Behavior and Cognition at the Max Planck Institute for Human Development in Berlin and former Professor of Psychology at the University of Chicago. He won the AAAS Prize for the best article in the behavioral sciences.

Reinhard Selten

Reinhard Selten received his PhD in mathematics at the University of Frankfurt am Main. Reinhard Selten is Fellow of the Econometric Society, President of the European Economic Association, a Honorary Member of the American Economic Association, a Member of the Nordrhein-Westfälische Akademie der Wissenschaften, and a Foreign Honorary Member of the American Academy of Arts and Sciences. He is also a Honora Patrona Komitato at Universala Esperanto Asocio. His main areas of interest are Game Theory and its applications as well as Experimental Economics and the Theory of Bounded Rationality. In 1994 he won the Nobel Memorial Prize in Economics, together with John C. Harsanyi and John F. Nash.

DECISIONS FROM EXPERIENCE AND THE EFECTS OF RARE EVENTS IN RISKY CHOICE

Studies of risky choice almost always examaine decisions made from descriptive sources of information, for example pie charts and frequency distributions. Nonetheless, people in the real world usually make decisions without descriptions and rely on personal experience. The studies described here indicate a discrepancy in choice behavior concerning specific rare events. Why do decisions made from descriptions seem to overweight rare events and decisions made from experience seem to underweight them? A recent study by Ralph Hertwig, Greg Barron, Elke Weber and Ido Erev investigates how the manner of information acquisition, whether from a descriptive source or from personal experience, can dramatically influence choice behavior.

Abstract:
When people have access to information sources such as newspaper weather forecasts, drug-package inserts, and mutual-fund brochures, all of which provide convenient descriptions of risky prospects, they can make decisions from description. When people must decide whether to back up their computer’s hard drive, cross a busy street, or go out on a date, however, they typically do not have any summary description of the possible outcomes or their likelihoods. For such decisions, people can call only on their own encounters with such prospects, making decisions from experience. Decisions from experience and decisions from description can lead to dramatically different choice behavior. In the case of decisions from description, people make choices as if they overweight the probability of rare events, as described by prospect theory. We found that in the case of decisions from experience, in contrast, people make choices as if they underweight the probability of rare events, and we explored the impact of two possible causes of this underweighting-reliance on relatively small samples of information and overweighting of recently sampled information. We conclude with a call for two different theories of risky choice.

Quotes:
“Studies of human risky choice almost exclusively examine decisions from description. In a recent meta-analysis of all studies involving decisions between a two-outcome risky prospect and a sure thing (with equal expected value), Weber et al. (2004) found that all 226 choice situations called for decisions from description.”

“Respondents in the experience and description groups faced structurally identical problems. Yet their choices were dramatically different. Differences in choices were consistent with the assumption that in decisions from experience, rare events had less impact than they deserved on the basis of objective probability (and in decisions from description, rare events had more impact than they deserved). Moreover, the underweighting of rare events in decisions from experience appears to be robust across experimental paradigms:”

“Reliance on small samples of experience not only plays a key role in decisions from experience but also contributes to perception of the world as less variable than it actually is… Although small samples have the result that decision makers explicitly and hence presumably also implicitly underestimate the probability of rare events, underweighting of rare events is likely to emerge in decisions from experience even if people can provide accurate explicit estimates of the probabilities.”

“In decisions from experience, respondents need to update their impression of the options’ attractiveness by combining newly sampled outcomes with their knowledge from previous draws. Such updating can give rise to recency effects (e.g., Hogarth & Einhorn, 1992), that is, to judgments in which recently sampled outcomes receive greater weight than earlier sampled ones.”

“Not only probabilities and outcomes but many kinds of information can be learned through experience or description. Base rates, distributional information, and degrees of causal strength are a few examples. Thus, one might expect the way in which information is learned to influence cognitive processes in many domains. Indeed, in research on Bayesian reasoning, for instance, there is evidence that performance depends on whether base rates are directly experienced or symbolically described”

“In a study of foraging decisions made by bees, Real (1991) observed that “bumblebees under perceive rare events and over perceive common events” (p. 985), when the events are instances of food. To explain why bees’ “probability bias” diverges from that observed in humans, real cited, among other factors, the fact that bees’ samples from payoff distributions are truncated because of memory constraints.”

About the Authors:

Prof. Dr. Ralph Hertwig

Ralph Hertwig is assistant Professor of applied Cognitive Science at the Institute for Psychology in the University of Basel. Hertwig has been a research scientist both in the Center for Adaptive Behavior and Cognition at the Max Planck Institute for Human Development in Berlin and at the MPI for Psychological research in Munich, Germany. In 1996 he Hertwig won the 1996 Heinz Heckhausen Young Scientist Prize of the German Society for Psychology. He recieved his PhD (Dr. rer soc.) Summa Cum Laude in Cognitive Psychology from The University of Konstanz in 1995.

Ralph Hertwig homepage

Greg Barron

Greg Barron is an Assistant Professor in the Negotiations, Organizations, and Markets Unit at the Harvard Business School. He came to HBS in 2003 as the CLER (Computer Lab for Experimental Research) Research Fellow in Business Administration. Greg received his B.A. in Psychology from Haifa University and his Ph.D. in Behavioral Sciences from the Technion, Israel Institute of Technology. Prior to obtaining his Ph.D. he worked at Elbit Systems Ltd. as an HR coordinator and at the Carmel Center for Groups as a certified group facilitator. Greg’s primary research interests are in the field of decision making, focusing on the effects of economic incentives on repeated decisions.

Greg Barron Home Page

Elke Weber

Elke Weber is a professor of psychology and Management at Columbia University. She recieved her PhD from Harvard University in 1984. Her research interests include Behavioral models of judgment and decision making under risk and uncertainty. She is also interested in psychologically appropriate ways to measure and model individual and cultural differences in risk taking, specifically in risky financial situations and environmental decision making and policy.

Elke Weber Home Page

Ido Erev

Ido Erev is a member of the William Davidson Faculty of Industrial Engineering and Management as a professor at Technion, Haifa, Israel. His primary research interests are cognitive psychology, Individual decision making under uncertainty, human judgment and subjective probability, behavioral implications of game theory, social dilemmas and attention control.

Ido Erev Home page

DECISION SCIENCE RESEARCHER PROFILE: GORDON BOWER

Dr. Gordon Bower is considered one of the nation’s leading experimental psychologists and learning theorists. He did some of the earliest work investigating the effect of mood states on memory. In 1959 he received his PhD with distinction from Yale University. That same year Dr. Bower became a member of the psychology faculty at Stanford University and has remained there ever since. Both his research and his Chairmanship of the of the psychology department are in large part responsible for the establishment of Stanford University as a top rated research institution. In 1973, he was elected to the National Academy of Sciences. He served as Senior Scientist for the National Institute of Mental Health (NIMH) in 1993. During that time Dr. Bower co-chaired a panel of scientists gathered together from across the behavioral and social sciences to investigate the current state of mental-health knowledge in those fields. From that work came a guide to develop NIMH into the 21st century entitled Basic Behavioral Science Research for Mental Health: A National Investment. Dr. Bower has also served as president of The American Psychological Society and the Western Psychological Association, and as Senior Science Advisor to the American Psychological Association.

Currently, Dr. Bower is the A. R. Lang Professor of Psychology at Stanford University. Beyond his own research, he contributes to the strengthening of institutions that support scientists. Dr. Bower’s research on the role of emotions in learning has played a significant role in the current resurgence of interest by scientific researchers into the study of emotion.

Field of Expertise and Research Interests:
Conditioning, Learning, Memory, Language Comprehension, Mathematical Models, Computer Simulation of Memorial Processes, Behavior Modification

Academic Career:
1959-present Professor of Psychology at Stanford University

Selected Honors and Affiliations:
1993-Present Science Directorate American Psychological Association, Board of Scientific Advisors
1993-Present Elected Chief Scientific Advisor American Psychological Association, Board of Scientific Advisors
1993 Honorary Doctorate of Science Indiana State University
1992-1993 Senior Science Advisor National Institute of Mental Health, NIH
1991-1993 President American Psychological Society
1991 Honorary Doctorate of Humane Letters University of Chicago
1990-1991 President Western Psychological Association
1989-1990 President Elect Western Psychological Association
1989 President Society of Experimental Psychologists
1989 William James Fellow Award American Psychological Society
1987-1988 Elected Chairman of the Governing Board and President Cognitive Science Society
1983-1986 Associate Dean of Humanities and Sciences Stanford University
1978-1982
Chairman, Stanford University, Psychology Department
Research Advisor, National Institute of Mental Health, NIH
Research Advisor, American Psychological Association
Distinguished-Chair Professor, Stanford University, Psychology
Department
1973 Elected Member National Academy of Science
1959 to present Professor of Psychology at Stanford University

Education:
1959 Ph.D. (With Distinction) Psychology Yale University
1957 M.S. CT Psychology Yale University
1954-1955 Woodrow Wilson Fellowship Philosophy of Science University of Minnesota
1954 B.A. Western Reserve University

Quotes:
“I was sitting there all alone, waiting anxiously for the intruders to break in, when who should happen along but a colleague and former Yale graduate student roommate, Gordon Bower. Gordon had heard we were doing an experiment, and he came to see what was going on. I briefly described what we were up to, and Gordon asked me a very simple question: “Say, what’s the independent variable in this study?” -Philip G. Zimbardo after the Stanford Prison Experiment.

The following is from Emotion and Social Judgments Gordon H. Bower

“In 1976, while studying the impact of various emotional states on memory (Bower et al., 1978; Bower, 1981), I also became interested in mood effects on social judgment. Since the effects of mood on memory probably play a central role in biasing judgments, I will briefly tell you what we were learning from that research. We were finding two effects – one we called “mood-dependent retrieval,” and the other we called “mood-congruent processing”…

Mood-dependent retrieval refers to the idea that a person’s emotional state can become associated with ongoing events, so that the events and the emotion are stored in memory together. Later those memories can be best retrieved if the person returns to an emotional state similar to that experienced during the original event. Thus, when made happy, people should do better recalling events experienced earlier when they were happy. When sad, they should more easily recall events they experienced when they were sad…

It appears that mood-dependent retrieval is at work in a variety of learning and recall situations beyond working with word lists in a laboratory. For example, it applies to people’s recall of autobiographic events. When asked to recall an unselected sample of autobiographic events from their recent past, people will retrieve a biased set of events that agrees with their emotional state during recall…

The second phenomenon (Bower, 1981; 1983) we called mood-congruent processing, which means that a person’s mood can sensitize the person to take in mainly information that agrees with that mood. Material that is congruent with the mood becomes salient so that the person attends to it more deeply than to other material. The person thinks about that material more deeply and associates it more richly with other information (an activity we call associative elaboration). The result is that the person learns this material better than non-mood-congruent material. Thus, when happy, people will attend and respond more to pleasant than unpleasant pars of their environment and learn more about them; when sad, they’ll attend and respond more to its unpleasant than to its pleasant parts and learn more about them…

There’s a mood-congruent advantage: people who were happy during the initial experience learn the happy events better; angry people learn anger-provoking events better; and sad people learn sad events better… Although these results illustrate mood-congruent learning under laboratory-induced moods, available evidence suggests that such selective learning also happens with naturally occurring variations in everyday moods (Mayer et al., in press).”

Gordon Bower CV

EXPLAINING PURPORTEDLY IRRATIONAL BEHAVIOR BY MODELING SKEPTICISM IN TASK PARAMETERS:

Numerous psychological articles have claimed to demonstrate human “irrationality,” but Craig R. M. McKenzie, John T. Wixted, and David C. Noelle suggest that these studies have made one crucial assumption. When subjects demonstrate behavior (predictable or unpredictable), researchers believe that the subjects believe the assumptions or parameters underlying the purported normative response. Hence unpredictable behavior would be due to irrationality on the part of the subject. McKenzie et al. argue that people are in fact quite rational in such circumstances as exhibiting unpredictable behavior; they simply don’t trust what people in lab coats tell them. Accounting for participant doubt concerning the legitimacy of explicit key task parameters from the start of an experiment is more effective than trying to convince subjects that what they are being told is true.

Abstract:
“Many purported demonstrations of irrational behavior rely on the assumption that participants believe key task parameters that are merely asserted by experimenters. For example, previous researchers have found that participants who first reported confidence in items presented in a yes–no format did not change confidence to the degree prescribed by the normative model when those same items were later presented in a forced-choice format. A crucial assumption, however, was that participants fully believed the assertion that the forced-choice items were mutually exclusive and exhaustive. In this article, the authors derive and test a new normative model in which it is not assumed that participants fully believe the assertion. Two visual identification experiments show that the new normative model provides a compelling account of participants’ confidence reports.”

Complete article

Quotes:
“In essence, all information is imperfectly reliable, and information provided to participants by experimenters is no exception. Indeed, experimenter-provided information might be less trustworthy than most. Participants are often deceived in psychology experiments, and they are aware of this.”

“In many tasks, participants’ behavior is compared to a normative standard, and differences between behavior and the normative response are routinely interpreted as errors … If participants do not fully believe key task parameters, which are often merely asserted by experimenters, then calling their responses ‘errors’ would be misleading.”

“The idea that participants may not fully believe key task parameters is not one that is generally taken into consideration in experiments designed to assess whether participants behave in a normative manner. Often, researchers arrive at the conclusion that participants do not behave normatively, just as McKenzie et al. (2001) did. Not only does our proposed approach make salient various assumptions experimenters might otherwise take for granted, but it also highlights the fact that there are often multiple normatively defensible responses to a given situation.”

“We mention just one more example. Ross, Lepper, and Hubbard (1975) presented participants with pairs of suicide notes, one of which was said to be authentic and one of which was said to be inauthentic. Participants were to judge which note was authentic for a series of such pairs and, after each judgment, received feedback. All participants received predetermined (i.e., false) feedback, indicating either that most of their judgments were correct or that most were incorrect … Note the participants’ quandary after being told they had been deceived (“Were they lying to me then, or are they lying to me now?”), and any skepticism about what the experimenter said about the false feedback leads to results that the authors consider irrational … The initial debriefing was also part of the experiment, and participants were deceived then, too. It was only during the final debriefing that participants were told the true purpose of the experiment. Maybe the only irrational thing to do in any experiment is to fully believe anything the experimenter tells you.”

“We believe it is best to accept participant skepticism as an important—and tractable—variable in laboratory experiments, especially those that compare behavior to a normative standard. The success of the trust model in the present context shows that it is both desirable and feasible to develop normative models in which it is not assumed that participants believe key assumptions that are often taken for granted by experimenters.”

About the Authors:

David C. Noelle

Currently David C. Noelle is assistant professor of computer science and assistant professor of psychology at Vanderbilt University. He is also working as a postdoctoral researcher at the Center for the Neural Basis of Cognition. He received his PhD in Cognitive Science and Computer Science from the University of California, San Diego (UCSD) in 1997. His research interests include artificial intelligence, machine learning, and cognitive modeling using connectionist techniques. He is also interested in modeling “high level” cognitive processes using “low level” artificial neural network models. Noelle’s current research is focused on connectionist models of rule guided behavior and learning from direct instruction.

David C. Noelle home page

Craig R. M. McKenzie

Craig R. M. McKenzie is an associate professor at the University of California, San Diego. He received his Ph.D. in Psychology from The University of Chicago in 1994. McKenzie is a cognitive psychologist interested in inference, uncertainty, and choice. Most of His recent research explains errors people purportedly make in the laboratory by (a) adopting a different (usually Bayesian) normative approach to the task of interest and (b) taking into account the typical structure of the environment. “I often find that “errors” are the result of people behaving as (qualitative) Bayesians who make reasonable assumptions about task parameters that reflect how the world usually works.” He doesn’t claim that people never make mistakes, only that people’s behavior is much richer, more interesting — and often more rational — than usually depicted in the judgment-and-decision-making literature.

Craig R. M. McKenzie home page

John T. Wixted

Presently John T. Wixted is professor & chair of the Department of Psychology at The University of California at San Diego. He earned his Ph.D. in clinical psychology from Emory University in 1987. His research interests mainly involve signal-detection models of recognition memory and the psychology and neuroscience of forgetting, but “I maintain a connection to my clinical background by teaching Abnormal Psychology on a regular basis”.

John T. Wixted home page