Journal of Risk and Uncertainty

, Volume 10, Issue 1, pp 15–36 | Cite as

Decision making under ignorance: Arguing with yourself

  • Robin M. Hogarth
  • Howard Kunreuther
Article

Abstract

The metaphor of gambling has had great influence on the topic of choice under uncertainty. However, in many real-world situations, people must make choices when they lack information about the relevant economic features of gambles, i.e., probabilities and outcomes. We refer to this as choice under ignorance as opposed to choice under risk or uncertainty. We propose that people handle these decisions by generating rationales or arguments that allow them to resolve the choice conflict. Moreover, these rationales often do not correspond to principles derived from the cost-benefit framework of economic models. These ideas are explored in two experiments in which subjects simulated the purchase of warranties for consumer durables. Our principal findings are, first, that observable behaviors differ between situations where subjects do and do not have information on probabilities and outcomes. Second, economic cost-benefit models did not yield good descriptions of our subjects' decisions. Third, the nature of arguments used, and thus the processes invoked, differed as a function of the information available to subjects. And fourth, subjects' arguments indicated two types of strategies for reaching decisions. In one, they processed the particular characteristics of each choice option; in the other, they invoked a “meta-rule” or principle that resolved the choice conflict and was insensitive to the particular features of different options. Finally, we discuss the implications of our results. This includes questioning the appropriateness of using the gamble as a metaphor for choice in future research.

Key words

ambiguity uncertainty risk ignorance cognitive processes 

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Copyright information

© Kluwer Academic Publishers 1995

Authors and Affiliations

  • Robin M. Hogarth
    • 1
  • Howard Kunreuther
    • 2
  1. 1.Graduate School of BusinessUniversity of ChicagoChicago
  2. 2.Wharton SchoolUniversity of PennsylvaniaPhiladelphia

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