, Volume 3, Issue 2, pp 65-80

Framing and the theory-simulation controversy. Predicting people's decisions

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Abstract

We introduce a particular way of drawing the distinction between the use of theory and simulation in the prediction of people's decisions and describe an empirical method to test whether theory or simulation is used in a particular case. We demonstrate this method with two effects of decision making involving the choice between a safe option (take amount X) and a risky option (take double the amount X with probability 1/2). People's predictions of choice frequencies for trivial (€ 0.75) as opposed to substantial (€ 18) amounts in Experiment 1 are quite accurate when they are presented with both conditions juxtaposed but are less accurate when only given one of the conditions. This result is interpreted to speak for the use of theory in prediction. In contrast people's predictions of the framing effect for substantial amounts (more risk seeking for positively than negatively framed problems) are accurate only for independent predictions but not for juxtaposed predictions, which speaks for the use of simulation.