Neuroeconomics, Judgment, and Decision Making

310 Pages·2014·1.339 MB·English

by  Evan A. Wilhelms, Valerie F. Reyna

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