The Priority Heuristic: Making Choices Without Trade-offs

Psychological Review, 2008

E. Brandstatter, G. Gigerenzer, and R. Hertwig (2006) contended that their priority heuristic, a type of lexicographic semiorder model, is more accurate than cumulative prospect theory (CPT) or transfer of attention exchange (TAX) models in describing risky decisions. However, there are 4 problems with their argument. First, their heuristic is not descriptive of certain data that they did not review. Second, their analysis relied on a global index of fit, percentage of correct predictions of the modal choice. Such analyses can lead to wrong conclusions when parameters are not properly estimated from the data. When parameters are estimated from the data, CPT and TAX fit the D. Kahneman and A. Tversky (1979) data perfectly. Reanalysis shows that TAX and CPT do as well as the priority heuristic for 2 of the data sets reviewed and outperform the priority heuristic for the other 3. Third, when 2 of these sets of data are reexamined, the priority heuristic is seen to make systematic viola...

2013

In this article, we tested two concepts of decision making: expected utility theory and heuristic choice. In Experiment 1, we applied think-aloud protocols to investigate violations of expected utility theory. In Experiments 2 to 4, we introduced a new process-tracing method-called predictaloud protocols-that has advantages over previously suggested research methods. Results show the following: (i) people examine information between rather than within gambles; (ii) the priority heuristic emerges as the most frequently used strategy when problems are difficult; and (iii) people check for similarity when problems are easy.

Journal of Mathematical Psychology, 1999

In recent years, descriptive models of risky choice have incorporated features that reflect the importance of particular outcome values in choice. Cumulative prospect theory (CPT) does this by inserting a reference point in the utility function. SPÂA (security-potentialÂaspiration) theory uses aspiration level as a second criterion in the choice process. Experiment 1 compares the ability of the CPT and SPÂA models to account for the same within-subjects data set and finds in favor of SPÂA. Experiment 2 replicates the main finding of Experiment 1 in a between-subjects design. The final discussion brackets the SPÂA result by showing the impact on fit of both decreasing and increasing the number of free parameters. We also suggest how the SPÂA approach might be useful in modeling investment decision making in a descriptively more valid way and conclude with comments on the relation between descriptive and normative theories of risky choice.

2015

This paper re-examines the commonly observed inverse relationship between per-ceived risk and perceived benefit. We propose that this relationship occurs because people rely on aect when judging the risk and benefit of specific hazards. Evidence supporting this proposal is obtained in two experimental studies. Study 1 investigated the inverse relationship between risk and benefit judgments under a time-pressure condition designed to limit the use of analytic thought and enhance the reliance on aect. As expected, the inverse relationship was strengthened when time pressure was introduced. Study 2 tested and confirmed the hypothesis that providing information designed to alter the favorability of one’s overall aective evaluation of an item (say nuclear power) would systematically change the risk and benefit judgments for that item. Both studies suggest that people seem prone to using an ‘aect heuristic ’ which improves judgmental eciency by deriving both risk and benefit evaluations f...

2001

We examine the effects of probability and mode of acquisition on choices between hedonic and utilitarian alternatives. The results suggest that the lower the probability of receiving the selected item, the more likely individuals will be to choose the more hedonic alternative in a choice set. Mode of acquisition (i.e., whether subjects are choosing in a windfall or a standard purchase situation) is also found to affect preferences, even when probability of acquisition is held constant. Hedonic options appear to be more popular as prizes than as purchases, whereas utilitarian options appear to be more popular as purchases than as prizes.

Journal of Behavioral Decision Making, 2000

This paper reexamines the commonly observed inverse relationship between perceived risk and perceived bene®t. We propose that this relationship occurs because people rely on aect when judging the risk and bene®t of speci®c hazards. Evidence supporting this proposal is obtained in two experimental studies. Study 1 investigated the inverse relationship between risk and bene®t judgments under a time-pressure condition designed to limit the use of analytic thought and enhance the reliance on aect. As expected, the inverse relationship was strengthened when time pressure was introduced. Study 2 tested and con®rmed the hypothesis that providing information designed to alter the favorability of one's overall aective evaluation of an item (say nuclear power) would systematically change the risk and bene®t judgments for that item. Both studies suggest that people seem prone to using an`aect heuristic' which improves judgmental eciency by deriving both risk and bene®t evaluations from a common source Ð aective reactions to the stimulus item. Copyright # 2000 John Wiley & Sons, Ltd. KEY WORDS aect heuristic; judgment; perception of risk; perception of bene®t Although aect has long played a key role in many behavioral theories, it has rarely been recognized as an important component of human judgment and decision making. Perhaps be®tting its rationalistic origins, the main focus of descriptive decision research has been cognitive, rather than aective. When principles of utility maximization appeared to be descriptively inadequate, Simon (1956) oriented the ®eld toward problem solving and information-processing models based upon bounded rationality and concepts such as satis®cing (as opposed to maximizing). The work of Tversky and Kahneman (1974) demonstrated how boundedly rational individuals employed heuristics such as availability, representiveness, and anchoring and adjustment to make judgments and how they used simpli®ed strategies such

Annals of the New York Academy of Sciences, 2006

2009

Experimental work on preferences over risk has typically considered choices over a small number of discrete options, some of which involve no risk. Such experiments often demonstrate contradictions of standard expected utility theory. We reconsider this literature with a new preference elicitation device that allows a continuous choice space over only risky options. Our analysis assumes only that preferences depend on the probability p and prize x; U = u(p; x): We then allow subjects to choose p and x continuously on a linear budget constraint, r 1 p + r 2 x = m, so that all prospects with a nonzero expected value are risky. We test …ve of the most importantly debated questions about risk preferences: rationality, prospect theory asymmetry, the independence axiom, probability weighting, and constant relative risk aversion. Overall, we …nd that the expected utility model does unexpectedly well.

PLOS Comp. Biology, 2019

A key question in decision-making is how people integrate amounts and probabilities to form preferences between risky alternatives. Here we rely on the general principle of integration-to-boundary to develop several biologically plausible process models of risky-choice, which account for both choices and response-times. These models allowed us to contrast two influential competing theories: i) within-alternative evaluations, based on multiplicative interaction between amounts and probabilities, ii) within-attribute comparisons across alternatives. To constrain the preference formation process, we monitored eye-fixations during decisions between pairs of simple lotteries, designed to systematically span the decision-space. The behavioral results indicate that the participants' eye-scanning patterns were associated with risk-preferences and expected-value maximization. Crucially, model comparisons showed that within-alternative process models decisively outperformed within-attribute ones, in accounting for choices and response-times. These findings elucidate the psychological processes underlying preference formation when making risky-choices, and suggest that compensatory, within-alternative integration is an adaptive mechanism employed in human decision-making. Author summary Decision-making under risk requires a selection between alternatives, such as lotteries, which offer a reward with a specified probability. Human decision between such alternatives is at the center of the normative decision theory, which assumes that decisions are rationally made by forming a value for each alternative and selecting the alternative with the highest value. To this day, there is still a considerable debate on how such values are computed. While the normative theory assumes that values of the alternatives reflect the statistically expected rewards, more recent theories have argued that alternative-values are not computed, and choices are only based on sequentially comparing the alternatives on amounts or on probabilities. Here, we carried out an experimental investigation of risky decision-making, in which participants chose between pairs of simple lottery alternatives that systematically span a range of probabilities and amounts, while we tracked their eye PLOS Computational Biology | https://doi.org/10.1371/journal.pcbi.

2005

During the last twenty-five years, prospect theory (and its successor, cumulative prospect theory) replaced expected utility as the dominant description of risky decision making. Although these models account for classic paradoxes, eleven new paradoxes show where prospect theories lead to self-contradiction or false predictions. The new findings are consistent with and, in several cases, were predicted by simple "configural weight" models in which probability-consequence branches are weighted by a function that depends on branch probability and ranks of consequences on discrete branches. Although they have some similarities to models later called "rankdependent," these models do not satisfy coalescing, the assumption that branches leading to the same consequence can be combined by adding their probabilities. Nor do they satisfy cancellation, the "independence" assumption that branches common to both alternatives can be removed. The transfer of attention exchange model, with parameters estimated from previous data, correctly predicts results with all eleven new paradoxes. Apparently, people do not frame choices as prospects, but instead, as trees with branches.

2008

Rationality and Society, 1996

We receive helpful comments from seminar participants at CIRANO (Montréal) and LAMIA (Paris).

Journal of Behavioral Decision Making, 2009

The fast-and-frugal heuristic framework assumes noncompensatory tools for human preferences (i.e., priority heuristic) and inferences (i.e., take the best heuristic). According to this framework, these heuristics predict choice behavior as well as model the cognitive processes underlying such behavior. The current paper presents two studies that juxtapose predictions derived from these two simple heuristics with alternative predictions derived from compensatory principles. Dependent measures that included reaction time, choice pattern, confidence level, and accuracy were better predicted by compensatory indices than by noncompensatory indices. These findings suggest that people do not rely on limited arguments only, but tend to integrate all acquired information into their choice processes. This tendency was replicated even when the experimental task facilitated the use of noncompensatory principles. We argue that the fast and frugal heuristics can predict the final outcome only under certain conditions, but even in these particular situations they are not applicable to the processes underlying choice behavior. An integrative model for choice behavior is proposed that better represents the data.

Journal of Economics and Business, 2013

Prospect Theory (PT), which relies on subjects' behavior as observed in laboratory experiments contradicts the behavior predicted by the Expected Utility (EU) paradigm. In this study, we introduce the concept of Temporary Attitude Towards Risk (TATR) and Permanent Attitude Towards Risk (PATR). Using these concepts, we build a model that merges both the PT and the EU paradigms. The TATR and PATR concepts explain recent experimental findings and the observed stock price overreaction. We relate the properties of PT to some well-known financial and economic results. We show that a positive risk premium with decreasing absolute risk aversion (DARA) can be consistent with the S-shaped value function used in PT. Finally, we introduce the Prospect Stochastic Dominance (PSD) rule for partial ordering of uncertain prospects for all S-shaped value functions.