|M.Sc Student||Amos Schurr|
|Subject||Peak or Freq? The Effect of Unpleasant Extreme Experiences|
|Department||Department of Industrial Engineering and Management||Supervisor||Full Professor Erev Ido|
Study of the subjective evaluation of unpleasant experiences (see Fredrikson & Kahneman, 1993) suggests that people tend to overweigh relatively few significant rare events (e.g., the most unpleasant moment). This phenomenon is known as the “peak effect.” On the other hand, study of decisions from experience (e.g., Barron & Erev, 2003) suggests that people tend to rely on typical and frequent events while underweighting rare events. This phenomenon is referred to as the “freq effect.” The current research explores this apparent inconsistency. It presents four studies in which participants were asked to make either ongoing repeated decisions or make a decision on a plan, based on their experience. Their decisions were made in two different timings: immediately after gathering the experience and in a delayed session (3 weeks to 6 months after their initial experience). Experiments 1a and 1b examined choice behavior among monetary gambles. Experiments 2a and 2b examined choice behavior among two sets of unpleasant pictures. The results of the four experiments reveal an interaction between the types of decision (planning vs. ongoing) and the timing of that decision. The freq effect was observed in ongoing decisions, and it was enhanced by time delay. Only in delayed planning decisions was the peak effect observed. These results can be summarized with a simple model assuming that the peak effect captures long term memory, but ongoing decisions are made based on small samples of recent experiences.