|Ph.D Student||Greg Barron|
|Subject||On the Effect of Repeated Experience on Judgment and|
|Department||Department of Industrial Engineering and Management||Supervisor||Full Professor Erev Ido|
The present research dissertation explores inconsistencies between empirical results in judgment and decision making. A first study examines 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. A second study explores the judgment-decision paradox: the finding that rare events are overweighted in probability judgments but are underweighted in repeated decisions under uncertainty. Two laboratory experiments examine both decisions and probability assessments within the same paradigm. The results reveal overweighting and negative recency in probability assessments but underweighting and positive recency in choices. At the same time, there is consistency between choices and assessments independent of the common history of outcomes. A third experiment validates the results in a field study. The results show that, after a negative rare-event (i.e. a suicide bombing) people believe the risk to have decreased (negative recency) but are more cautious (positive recency). Both studies present simple models that summarize the results and modify existing quantifications of judgment and decision making. The theoretical and applied benefits of studying empirical inconsistencies are discussed.