|M.Sc Student||Nevo Iris|
|Subject||On Surprise, Change and the Effect of Recent Outcomes|
|Department||Department of Industrial Engineering and Management||Supervisor||Professor Ido Erev|
|Full Thesis text|
The leading models of learning in repeated choice tasks rest on the assumption that decision makers tend to select the alternatives that led to the best recent outcomes. The current research highlights three boundaries of this "recency assumption." Analysis of the stock market and simple laboratory experiments suggests that positively surprising obtained payoffs, and negatively surprising forgone payoffs reduced the rate of repeating the previous choice. In addition all previous outcomes, but the most recent, have similar effect of future choices. We show that these results, and other robust properties of decisions from experience, can be captured with a simple addition to the leading models: the assumption that surprise triggers change.