The Priority Heuristic & Decision Making

Abstract (Via JDM)

Although many models for risky choices between gambles assume that information is somehow integrated, the recently proposed priority heuristic (PH) claims that choices are based on one piece of information only. That is, although the current reason for a choice according to the PH can vary, all other reasons are claimed to be ignored. However, the choices predicted by the PH and other pieces of information are often confounded, thus rendering critical tests of whether decisions are actually based on one reason only, impossible. The current study aims to remedy this problem by manipulating the number of reasons additionally in line with the choice implied by the PH. The results show that participants’ choices and decision times depend heavily on the number of reasons in line with the PH — thus contradicting the notion of non-compensatory, one-reason decision making.

Excerpt-What Is The Priority Heuristic (Via JDM)

In the simple case of non-negative two-outcome gambles comprising a minimum gain, a maximum gain, and according probabilities, the PH claims that the following steps are taken by a decision maker: First, an aspiration level is computed which is 1/10 of the largest maximum gain (rounded to the nearest prominent number, Brandstätter et al., 2006). If the difference between the minimum gains exceeds this aspiration level, the gamble with the larger minimum gain is chosen; thus, information search is stopped after one piece of information has been examined (henceforth PH1 case) and all probabilities and maximum gains are ignored. If this is not the case, the probabilities (of the minimum gains) are considered: should these differ by at least .10 the gamble with the smaller probability (for the minimum gain) is chosen. So, search is terminated after the second reason has been examined (thus labeled PH2 case) and a choice is made ignoring all gains. Finally, if the probabilities yield no such difference, the maximum gains are considered (PH3 case) and the gamble comprising the larger maximum gain is chosen. No trade-offs are made and thus there is no integration of information in the process

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03. July 2009 by Miguel Barbosa
Categories: Behavioral Economics, Curated Readings | Leave a comment

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