Institution: Max-Planck-Institut für Bildungsforschung Berlin
Abstract
Challenging the role of expected utility theory as the defining benchmark of rationality, ample evidence shows that people violate its axioms and predictions. At least two responses to 'choice anomalies' have emerged. One has been to modify the theory while retaining its mathematical expectation scaffolding (e.g., cumulative prospect theory; Tversky & Kahneman, 1992). A second response has been to explain risky choice as the direct consequence of the use of boundedly rational heuristics (e.g., priority heuristic; Brandstätter, Gigerenzer, & Hertwig, 2006). These two approaches to modeling risky choice—algebraic models in the expectation family and models of heuristics—have often been featured as opposite and incompatible views of human decision-making. The goal of this project is to bridge the gap between these approaches and to demonstrate that each can benefit enormously from the other. In particular, we aim to show that the use of specific heuristics results in distinct and identifiable parametric signatures when measured in terms of the psychophysical framework assumed by algebraic models such as cumulative prospect theory. Moreover, we will show that characteristic regularities in risky decision-making as measured by cumulative prospect theory''s functions—including loss aversion, risk aversion, and insensitivity to probabilities—stem from the operation of specific heuristics.
Project-related Publications
Hertwig, R., & Pedersen, A. P. (2016). Finding foundations for bounded and adaptive rationality. Minds and Machines, 26 (1-2), 1-8.
Suter, R. S., Pachur, T., & Hertwig, R. (2016). How affect shapes risky choice: Distorted probability weighting versus probability neglect. Journal of Behavioral Decision Making, 29, 437-449.
Suter, R. S., Pachur, T., Hertwig, R., Endestad, T., & Biele, G. (2015). The neural basis of risky choice with affective outcomes. PLoS ONE, 10(4):e0122475.
Pachur, T., Hertwig, R., Gigerenzer, G., & Brandstätter, E. (2013). Testing process predictions of models of risky choice: A quantitative model comparison approach. Frontiers in Psychology, 4:646.
Pachur, T., Hertwig, R., & Rieskamp, J. (2013). Intuitive judgments of social statistics: How exhaustive does sampling need to be? Journal of Experimental Social Psychology, 49, 1059-1077.
More publications can be found on this page.
Relation to the SPP1516's first funding period
Project "Algebraic models and models of heuristics of risky choice: Irreconcilable foes or useful allies?" (Hertwig/Pachur)