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Neuroeconomics, Judgment, and Decision Making PDF

310 Pages·2014·1.339 MB·English
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Neuroeconomics, Judgment, and Decision Making This volume explores how and why people make judgments and decisions that have economic consequences, and what the implications are for human well-being. It provides an integrated review of the latest research from many different dis- ciplines, including social, cognitive, and developmental psychology; neuroscience and neurobiology; and economics and business. The book has six areas of focus: historical foundations, cognitive consistency and inconsistency, heuristics and biases, neuroeconomics and neurobiology, devel- opmental and individual differences, and improving decisions. Throughout, the contributors draw out implications from traditional behavioral research as well as evidence from neuroscience. In recent years, neuroscientific methods have matured beyond being simply correlational and descriptive, into theoretical pre- diction and explanation, and this has opened up many new areas of discovery about economic behavior that are reviewed in the book. In the final part, there are appli- cations of the research into cognitive development, individual differences, and the improvement of decisions. The book takes a broad perspective and is written in an accessible way so as to reach a wide audience of advanced students and researchers interested in behav- ioral economics and related areas. This includes neuroscientists, neuropsycholo- gists, clinicians, psychologists (developmental, social, and cognitive), economists, and other social scientists; legal scholars and criminologists; professionals in public health and medicine; educators; evidence-based practitioners; and policy-makers. Evan A. Wilhelms is a PhD candidate in the Department of Human Development at Cornell University, and the Laboratory Leader in Dr. Valerie Reyna’s Laboratory for Rational Decision Making. His research is on the topics of judgment and decision making, with implications for financial and health well-being in adolescents and adults. His work has appeared in the Journal of Medicine and Philosophy and Virtual Mentor: American Medical Association Journal of Ethics , as well as several edited volumes. Valerie F. Reyna is Professor of Human Development and Psychology at Cornell University, Co-Director of the Cornell University Magnetic Resonance Imaging Facility, Co-Director of the Center for Behavioral Economics and Decision Research, and Past President of the Society for Judgment and Decision Making. Her research encompasses human judgment and decision making, numeracy and quantitative reasoning, risk and uncertainty, medical decision making, social judgment, and false memory. FRONTIERS OF COGNITIVE PSYCHOLOGY Series Editors Nelson Cowan, University of Missouri-Columbia David Balota , Washington University in St. Louis Frontiers of Cognitive Psychology is a new series of cognitive psychology books, which aims to bring together the very latest research in the discipline, providing a comprehensive and up-to-date review of the latest empirical, theoretical, and practical issues in the field. Each volume will concentrate on a traditional core area of cognitive psychology, or an area which is emerging as a new core area for the future, and may include interdisciplinary perspectives from areas such as devel- opmental psychology, neuroscience, evolutionary psychology, forensic psychology, social psychology, and the health sciences. Published Working Memory: The Connected Intelligence, Tracy Packiam Alloway & Ross G. Alloway (Eds) Neuroeconomics, Judgment, and Decision Making, edited by Evan A. Wilhelms & Valerie F. Reyna Forthcoming New Methods in Cognitive Psychology, Daniel H. Spieler & Eric Schumacher (Eds) Motivation and Cognitive Control, Todd S. Braver Big Data in Cognitive Science, Michael N. Jones Neuroeconomics, Judgment, and Decision Making Edited by Evan A. Wilhelms and Valerie F. Reyna First published 2015 by Psychology Press 711 Third Avenue, New York, NY 10017 and by Psychology Press 27 Church Road, Hove, East Sussex BN3 2FA Psychology Press is an imprint of the Taylor & Francis Group, an informa business © 2015 Taylor & Francis The right of the editors to be identified as authors of the editorial material and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. Library of Congress Cataloging-in-Publication Data Catalog record for this book has been requested. ISBN: 978-1-84872-659-8 (hbk) ISBN: 978-1-84872-660-4 (pbk) ISBN: 978-1-315-76392-7 (ebk) Typeset in New Caledonia by Apex CoVantage, LLC Contents List of Illustrations vii List of Contributors ix Introduction: Neuroeconomics, Judgment, and Decision Making xiii Evan A. Wilhelms and Valerie F. Reyna PART I HISTORICAL FOUNDATIONS 1 1 Decision Making by Experts: Influence of Five Key Psychologists 3 James Shanteau and Ward Edwards PART II COGNITIVE CONSISTENCY AND INCONSISTENCY 27 2 Cognitive Consistency: Cognitive and Motivational Perspectives 29 Anne-Sophie Chaxel and J. Edward Russo 3 Fuzzy-Trace Theory Explains Paradoxical Dissociations in Affective Forecasting 49 Evan A. Wilhelms, Rebecca K. Helm, Roni A. Setton, and Valerie F. Reyna PART III HEURISTICS AND BIASES 75 4 Intuition, Interference, Inhibition, and Individual Differences in Fuzzy-Trace Theory 77 Jonathan C. Corbin, Jordana M. Liberali, Valerie F. Reyna, and Priscila G. Brust-Renck 5 The Predecisional Distortion of Information 91 J. Edward Russo v vi CONTENTS 6 The Precision Effect: How Numerical Precision Influences Everyday Judgments 111 Manoj Thomas and Joowon Park PART IV NEUROECONOMICS AND NEUROBIOLOGY 129 7 Studying Decision Processes through Behavioral and Neuroscience Analyses of Framing Effects 131 Irwin P. Levin, Todd McElroy, Gary J. Gaeth, William Hedgcock, Natalie L. Denburg, and Daniel Tranel 8 “Hot” Cognition and Dual Systems: Introduction, Criticisms, and Ways Forward 157 Thomas E. Gladwin and Bernd Figner 9 Neuroeconomics and Dual Information Processes Underlying Charitable Giving 181 Stephan Dickert, Daniel Västfjäll, and Paul Slovic PART V D EVELOPMENTAL AND INDIVIDUAL DIFFERENCES 201 10 Risky Choice from Childhood to Adulthood: Changes in Decision Strategies, Affect, and Control 203 Anna C. K. van Duijvenvoorde, Brenda R. J. Jansen, and Hilde M. Huizenga 11 Individual Differences in Decision-Making Competence across the Lifespan 219 Wändi Bruine de Bruin, Andrew M. Parker, and Baruch Fischhoff PART VI IMPROVING DECISIONS 237 12 Predictors of Risky Decisions: Improving Judgment and Decision Making Based on Evidence from Phishing Attacks 239 Julie S. Downs, Donato Barbagallo, and Alessandro Acquisti 13 Improving Judgments and Decisions by Experiencing Simulated Outcomes 254 Robin M. Hogarth and Emre Soyer Index 275 Illustrations FIGURES 2.1 Conceptual framework. 35 2.2 Effect of goal and mindset priming by delay. 43 6.1 A model of discrepancy attribution effects in numerical judgments. 115 8.1 Illustration of the R3 model. 171 9.1 Psychophysical numbing function. 187 11.1 Antecedents, processes, and consequences of decisions. 229 12.1 A predictive model of behavior for protection against risky email. 242 13.1 Characterizations of decision tasks by description and experience. 257 13.2 Two ways of calculating the probability that a woman who tests positive in mammography screening actually has breast cancer (positive predictive value). 259 13.3 A coin toss simulator. 260 13.4 Set-up for the control group in the experiment involving the Investment task. 264 13.5 Set-up for the experience group in the experiment involving the Investment task. 265 13.6 Distributions of differences between judgments and normative answers in the experiment involving competitions. 268 13.7 Simulation results of subsequent outcomes of a person who ranked 5th in the first trial in a task where the correlation between skill and performance is .75. 270 TABLES 3.1 Illustrative findings supporting principles of FTT. 51 5.1 Results of studies using the stepwise evolution of preference method to assess information distortion. 94 9.1 Two modes of information processing. 184 vii viii ILLUSTRATIONS 13.1 Percentages of correct answers to well-known probabilistic problems by experimental conditions. 263 13.2 Means and standard deviations for all the groups in the experiment involving the Investment task. 266 Contributors Alessandro Acquisti , PhD, Natalie L. Denburg , PhD, Heinz College, Carnegie Mellon Carver College of Medicine, University University, Pittsburgh, PA; of Iowa, Iowa City, IA Co-director of the CMU Center for Behavioral Decision Research, Stephan Dickert , PhD, Pittsburgh, PA Vienna University of Economics and Business, Vienna, Austria; Linköping Donato Barbagallo , PhD, University, Linköping, Sweden Carnegie Mellon University, Pittsburgh, PA; Politecnico di Milano, Julie S. Downs , PhD, Milan, Italy Department of Social and Decision Sciences, Carnegie Mellon University, Wändi Bruine de Bruin , PhD, Pittsburgh, PA Leeds University Business School, Leeds, UK; Centre for Decision Anna C. K. van Duijvenvoorde , PhD, Research, Department of Engineering Department of Psychology, Leiden and Public Policy, Carnegie Mellon University, the Netherlands; Leiden University, RAND Corporation, Institute for Brain and Cognition, Pittsburgh, PA the Netherlands; Department of Psychology, University of Amsterdam, Priscila G. Brust-Renck , MA, the Netherlands Department of Human Development, Cornell University, Ithaca, NY Ward Edwards , * PhD, Department of Psychology, Anne-Sophie Chaxel , PhD, U niversity of Southern California, Desautels Faculty of Management, Los Angeles, CA McGill University, Montreal, Quebec, Canada Bernd Figner , PhD, Radboud University, Nijmegen, Jonathan C. Corbin , MA, the Netherlands; Center for the Department of Human Development, Decision Sciences, Columbia University, Cornell University, Ithaca, NY New York, NY ix

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