Showing papers on "Certainty effect published in 2003"
TL;DR: The authors explored situations in which the information available to decision makers is limited to feedback concerning the outcomes of their previous decisions and found that experience in these situations can lead to deviations from maximization in the opposite direction of the deviations observed when the decisions are made based on a description of the choice problem.
Abstract: The present paper explores situations in which the information available to decision makers is limited to feedback concerning the outcomes of their previous decisions. The results reveal that experience in these situations can lead to deviations from maximization in the opposite direction of the deviations observed when the decisions are made based on a description of the choice problem. Experience was found to lead to a reversed common ratio/certainty effect, more risk seeking in the gain than in the loss domain, and to an underweighting of small probabilities. Only one of the examined properties of description-based decisions, loss aversion, seems to emerge robustly in these ‘feedback-based’ decisions. These results are summarized with a simple model that illustrates that all the unique properties of feedback-based decisions can be a product of a tendency to rely on recent outcomes. Copyright # 2003 John Wiley & Sons, Ltd.
802 citations
TL;DR: In many theories of decision under risk, the utility of a prospect is independent of other options in the choice set, but the experiments presented here show a large effect of the available options, suggesting instead that prospects are valued relative to one another.
Abstract: In many theories of decision under risk (e.g., expected utility theory, rank-dependent utility theory, and prospect theory), the utility of a prospect is independent of other options in the choice set. The experiments presented here show a large effect of the available options, suggesting instead that prospects are valued relative to one another. The judged certainty equivalent for a prospect is strongly influenced by the options available. Similarly, the selection of a preferred prospect is strongly influenced by the prospects available. Alternative theories of decision under risk (e.g., the stochastic difference model, multialternative decision field theory, and range frequency theory), where prospects are valued relative to one another, can provide an account of these context effects.