Abstract
The growing literature on how people learn to make decisions based on experience focuses on two types of paradigms. In one paradigm, people are faced with a choice, and must retrospectively consult past experience of similar choices to decide what to do. In the other paradigm, people are faced with a choice, and then have the opportunity prospectively to gather new experiences that might help them make that choice. The current paper examines the joint impact of both retrospective and prospective experiences. Two experiments reveal strong interactions. In Study 1, repeated experience with new samples appears to reduce sensitivity to the average outcome in the samples and enhances underweighting of rare events. Study 2 shows that repeated experience with pre-choice samples can reverse the impact of the new information (and decrease the tendency to select the alternative that provides the best outcome in the new sample). The results suggest that prospectively gathering new samples can have two, potentially contrasting, influences on choice: the first focuses on the sample’s face value and selects the option with the higher value in the new sample; by contrast, the second treats the new sample as a cue to recall similar prior experiences, which in turn drive choice. The paper concludes with a discussion of the possibility that part of the descriptive value of prospect theory reflects the fact that it summarizes the joint impact of similar “face-or-cue” processes.
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Notes
These definitions imply that the existence of the gap does not imply underweighting of rare events in decisions from experience. For example, consider an experiment that studies decisions between R “10 with probability 0.9, 0 otherwise” and S “9 for sure” using the sampling and the description paradigms. Assume that the R-rate (the choice rate of the option that pays more with higher probability) is 40% in the sampling paradigm, and 10% in the description paradigm. The gap in this example is large (40% − 10% = 30%), but the results do not exhibit underweighting of rare events in the sampling paradigm (as the choice rate of the option that pays more with higher probability is lower than 50%).
When the feedback is limited to the obtained payoff, the tendency to underweight negative rare outcomes can be masked by the hot stove effect (Denrell & March, 2001).
While Wulff et al. (2018), did not find underweighting of rare events when the proportion of the rare outcome in the samples equaled its probability, they did find a weak description-experience gap even in this case. That is, the implied weighting of the rare outcomes was lower in decision from experience than in decisions for description.
This analysis was not planned in advanced, it was conducted in response to a reviewer’s request. The degree of freedom reflects the fact that only 41 participants experienced and responded in time to a sample with two rare events in the first block, and our analysis used a within person test. Additional analyses lead to similar conclusions. For example, the R-rate in the very first trial with a sample containing two rare events (62.5%) is significantly higher than the rate in all other trials with two rare events (37%), t(39) = 3.86, p = 0.0004. Similarly, the R-rate in the very first trial with a sample with two or more rare events (55%) is significantly higher than the rate in all other trials with two or more rare events (40%), t(37) = 2.10, p = 0.043.
The decrease in the risk rate given a sample with two rare outcomes could also be explained by assuming an increase in risk aversion with experience. However, this assertion cannot capture the flat learning curves observed when the sample included zero, one, or more than two rare outcomes.
Notice that Condition EV simulates natural situations, like the sneakers example, in which the sampling (e.g., trying the sneakers in the store) provide less information than the feedback for the actual decision (e.g., buying and wearing the sneakers).
The wise idea of presenting each problem twice was introduced by Wakker. However, his initial reaction to the results was not positive. He said (smiling, more or less) “these subjects are not very smart, not sure that I want to run more experiments.” The clarification of the magnitude of within-person choice variability has contributed to Erev’s interest in the implications of noise (e.g., Erev et al., 1994), and the impact of experience (e.g., Barron & Erev, 2003).
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Acknowledgements
Ido Erev was supported by the Israel Science Foundation (grant no. 535/17). Nathaniel J. S. Ashby was partially supported by a Technion fellowship. Nick Chater was supported by ERC grant 295917-RATIONALITY, the ESRC Network for Integrated Behavioural Science [grant number ES/K002201/1], the Leverhulme Trust [grant number RP2012-V-022], and RCUK Grant EP/K039830/1.
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Erev, I., Yakobi, O., Ashby, N.J.S. et al. The impact of experience on decisions based on pre-choice samples and the face-or-cue hypothesis. Theory Decis 92, 583–598 (2022). https://doi.org/10.1007/s11238-021-09856-7
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DOI: https://doi.org/10.1007/s11238-021-09856-7