Escaping from Bad Decisions: A Behavioral Decision-Theoretic Perspective (Perspectives in Behavioral Economics and the Economics of Behavior)

Front Cover
Escaping From Bad Decisions
Copyright Page
Contents
About the author
Preface
1 Introduction: Escaping from bad decisions
1.1 The classical problem of bad decision-making and akrasia
1.2 Second-order desires and bad decisions
1.3 The perspective proposed in this book: avoiding bad decision-making through prescriptive heuristics based on scientific...
1.3.1 The prescriptive approach of decision-making
1.3.2 Comparison of the approach adopted in this book with nudging and boosting
1.4 An overview of the contents of this book and suggestion to avoid bad decisions
1.4.1 The idea of worst and best decisions
1.4.2 Pluralism in decision-making
1.4.3 Prescriptive pluralistic decision-making
1.5 Conclusion and future perspectives
References
2 Formal definitions of the worst decisions, best decisions, and bad decisions
2.1 Framework to describe decision-making
2.1.1 What is the best and bad decision?
2.1.2 Preference relation and set theory
2.1.3 Ordering and comparative judgment
2.1.4 Various forms of comparative judgments
2.1.5 Various types of preference relation
2.2 Worst option, best option, and bad decision
2.2.1 Definition of worst and best options
2.2.2 Relationship between worst and best options
2.3 Conditions for guaranteeing preference relations of the worst and best options
2.3.1 Existence condition of worst option
2.3.2 Existence condition of best option
2.3.3 Relation of the worst and best options
2.4 Necessary and sufficient conditions for the existence of worst and best options
2.4.1 Necessary and sufficient conditions for the existence of worst option
2.4.2 Necessary and sufficient conditions for the existence of best option
2.4.3 Necessary and sufficient conditions for the existence of worst and best options
2.5 Conclusion
References
3 Rational choice, irrational choice, and bad decisions
3.1 Economic man and rational decision-making
3.2 Greatest element rationalizability
3.2.1 Greatest element rationalizability and the best option
3.2.2 Criteria of rationality and weak order
3.2.2.1 Two criteria of rationality
3.2.2.2 Rational choice and weak order
3.2.3 Criteria of irrationality and weak order
3.2.3.1 Two criteria of irrationality
3.2.3.2 Irrational choice and weak order
3.2.4 Criteria of rationality and irrationality
3.2.4.1 Two criteria of rationality and irrationality
3.3 Maximal-element rationalizability
3.3.1 Maximal-element rational choice
3.3.1.1 Maximal-element rationalizability and not inferior option
3.3.1.2 Maximal option and quasiorder
3.3.1.3 Theorem of the maximal-element rationalization
3.3.2 Maximal-element irrationality and bad decision
3.3.2.1 Maximal-element irrationality and not superior option
3.3.2.2 Maximal option and quasiorder
3.3.2.3 Theorem of the maximal-element irrational choice
3.3.3 Maximal-element irrationality and rationality
3.4 Conclusion
References
4 Preference ordering and measurement
4.1 Understanding preference relationships through ordering decisions and behavioral observations
4.2 Aspects of ordering decisions
4.2.1 Properties of preference relations
4.2.2 Equivalence relation
4.2.3 Relationship system
4.2.4 Total order and representation theorem
4.2.5 Weak order and representation theorem
4.3 What is the measurement of preference relations?
4.3.1 Correspondence and measurement
4.3.2 On the measurement and representation of preference relation
4.3.3 Uniqueness and measurement scale level
4.4 Quantitative representation of possible psychophysical laws and preference relations in terms of scale levels
4.4.1 Psychophysical laws
4.4.1.1 Psychological scale structure of preference
4.4.2 Representational measurement approach
4.5 Conclusion
References
5 Rational preference, irrational preference, and revealed preference
5.1 Rationality criteria and revealed preference
5.2 The concept of revealed preference
5.3 Utility functions and indifference curves
5.3.1 Indifference curve
5.3.2 Perfect substitute goods
5.3.3 Complete complementary goods
5.3.4 Indifference curve groups for noneconomic goods
5.3.5 Indifference curve group of neutral goods
5.4 Revealed preference
5.4.1 What is revealed preference?
5.4.2 Principle of revealed preference
5.4.3 Weak axiom of revealed preference
5.4.4 Strong axiom of revealed preference
5.4.5 A more general definition of rationality and revealed preference
5.5 Irrational choice and revealed preference
5.6 Revealed attention
5.7 Empirical testing of acyclic preference relations
5.7.1 Empirical investigation of acyclicity
5.7.2 Nontransitivity and thresholds
5.7.3 A decision-making model to explain nontransitivity
5.8 Conclusion
References
6 Multiattribute decision-making, multiobjective optimization, and the additive conjoint system
6.1 Plurality of values and multiattribute decision-making
6.2 Difficulties of multiattribute decision-making
6.2.1 Multiattribute decision-making and information search
6.2.2 Multiattribute decision-making, best decision, and worst decision
6.2.3 Multiattribute decision-making and intransitivity of preference
6.2.4 Difficulty of multiattribute decision-making and its psychological cause
6.3 Theoretical examination when multiattribute decision-making does not satisfy weak order property of preference
6.3.1 Preference based on the dominance principle
6.3.2 Preference based on the principle of the maximum number of dominant attributes
6.3.3 Impossibility theorem of multiattribute decision-making
6.4 Multiattribute decision-making and multioptimization
6.4.1 Multioptimization
6.4.2 Concept of multiobjective optimization
6.5 Additive conjoint structure and quasi best decision
6.5.1 Making the best decision with a single attribute and utility function
6.5.2 Multiattribute decision-making and additive conjoint structure
6.5.3 Axiomatic properties of additive conjoint structure
6.6 Conclusion
References
7 A computer simulation of cognitive effort and the accuracy of two-stage decision strategies in a multiattribute decision-...
7.1 Introduction
7.2 Findings and problems of previous research on decision strategies
7.2.1 Decision strategies identified
7.2.2 Computer simulation studies of multiattribute decision-making process and problems
7.3 Purpose and methods of computer simulation 1
7.3.1 Purpose of computer simulation 1
7.3.2 Method of computer simulation 1
7.4 Results and discussion of computer simulation 1
7.4.1 Strategies and cognitive effort in the first-stage
7.4.2 First-stage strategies and relative accuracy
7.4.3 Relationship between relative accuracy and cognitive effort
7.4.4 Relationship between the number of options, cognitive effort, and relative accuracy
7.4.4.1 Relationship between the number of choices and cognitive effort
7.4.4.2 Relationship between the number of choices and relative accuracy
7.4.5 Relationship between the number of attributes and cognitive effort and relative accuracy
7.4.5.1 Relationship between the number of attributes and cognitive effort
7.4.5.2 Relationship between the number of two attributes and relative accuracy
7.5 Purpose and method of computer simulation 2
7.5.1 Purpose of computer simulation 2
7.5.2 Method of computer simulation 2
7.6 Results and discussion of computer simulation 2
7.6.1 Relationship between the number of options left in the second-stage and cognitive effort
7.6.2 Relationship between the number of alternatives left in the second-stage and relative accuracy
7.7 General discussion
7.8 Conclusions and problems of this study
References
8 A computer simulation of bad decisions and good decisions: an extended analysis of two-stage decision strategies
8.1 A comparison between additive strategy (WAD) and lexicographic strategy (LEX) in multiattribute decision-making
8.2 Methodology of this study
8.2.1 Target decision strategy
8.2.2 Indicators of decision-making
8.2.3 Method of computer simulation
8.3 Results and discussion of computer simulation
8.3.1 Cognitive effort (elementary information processes)
8.3.2 Choice rate of the worst option
8.3.3 Relative accuracy defined by the difference from the minimum value and by Payne et al
8.3.4 Relative accuracy divided by cognitive effort (an index of efficiency)
8.3.5 Best choice rate
8.4 General discussions
8.5 Conclusion
References
9 A process tracing study of decision strategies and bad decisions
9.1 Implementation of the additive decision strategy and bad decision: a pilot study
9.1.1 Previous research on the choice accuracy and its problem
9.1.2 Purpose of the experiment
9.1.3 Method
9.1.4 Result and discussion
9.2 How to examine the effect of a second-stage decision-making strategy using process tracking on the bad decisions
9.2.1 Issues to be examined and the purpose of this study
9.2.2 Method of monitoring information acquisition as a process tracking technique
9.2.3 Overview of the experiment
9.2.4 Methods of the experiment
9.2.4.1 Participants in the experiment
9.2.4.2 Experimental equipment
9.2.4.3 Tasks and strategies used in the experiment
9.2.4.4 Experimental stimuli
9.2.4.5 Instruction
9.2.4.6 Instruction of information monitoring method
9.2.4.7 Questionnaire
9.3 Results and discussion of the experiment
9.3.1 Indicators used in the analysis
9.3.2 Relationship between decision time and worst choice adoption rate
9.3.3 Worst choice rate
9.3.3.1 First-stage strategy
9.3.3.2 Second-stage strategy
9.3.3.3 Rate of the worst option choice for each strategy of a combination of the first- and second-stage strategies
9.3.4 Correlation between decision time, worst choice adoption rate, and questionnaire
9.3.5 Crisis rate by strategy
9.3.6 Best choice rate for each strategy
9.3.6.1 First-stage strategy
9.3.6.2 Second-stage strategy
9.3.6.3 Best choice rates of combination of first- and second-stage strategies
9.3.7 Correlation between decision time, best option choice rate, and questionnaire
9.4 Conclusion
References
10 A process tracing study of bad decisions: using eye tracking in food decision-making
10.1 The problem of risky food decision-making and the assumptions of this study
10.2 Method of the eye-tracking experiment
10.2.1 Participants
10.2.2 Experimental setup
10.2.3 Decision-making issues
10.2.4 Experimental procedures
10.2.4.1 Instruction
10.2.4.2 Practice trial
10.2.4.3 Eye-tracker setup and calibration
10.2.4.4 Experimental trial
10.2.5 Content of instruction
10.2.5.1 Introductory instruction
10.2.5.2 Practice trials
10.2.5.3 Eye-tracking setup
10.2.5.4 Experimental trial
10.3 Results and discussion
10.3.1 Choice results and decision time in the food decision-making task
10.3.2 Results of the number of times a region was viewed for each food
10.3.3 Relationship between questionnaire food choice scores and eye-tracking data (average number of gazes per area)
10.3.4 Comparison of gazed behavior between worse decision and better decision
10.3.4.1 Spinach task
10.3.4.2 Mushroom task
10.3.4.3 Rice task
10.3.4.4 Beef liver task
10.3.4.5 Lettuce task
10.3.4.6 Water task
10.3.5 Relationship between the eye-tracker experiment and the questionnaire experiment
10.4 Questionnaire survey
10.4.1 Survey participants
10.4.2 Methodology of the questionnaire survey
10.4.2.1 Tasks for selecting foods
10.4.2.2 Scales for social behavior
10.4.2.3 Evaluation of knowledge about food safety
10.4.2.4 Knowledge confidence survey items
10.4.2.5 Information sources to be referred
10.4.2.6 Randomization and counterbalancing of the questionnaire
10.4.3 Results and discussion of the questionnaire survey
10.4.3.1 Food choice task in Question 1
10.4.3.2 Relationship between other question items and food choice problems
10.5 Conclusion
References
11 Decision strategies and bad group decision-making: a group meeting experiment
11.1 Group decision and groupthink
11.2 Method of the experiment
11.2.1 Overview of the experiment
11.2.2 Participants in the experiment
11.2.3 Procedures before conducting the experiment
11.2.3.1 Preliminary explanation of the experiment
11.2.3.2 Experimental practice
11.2.3.3 Preliminary survey
11.2.4 Experimental stimuli
11.2.4.1 Distributed agenda forms
11.2.4.2 Additional materials
11.2.4.3 Procedures
11.2.5 Questionnaire
11.2.5.1 Items related to the results of discussions
11.2.5.2 Evaluation items for the discussion
11.2.6 Experimental procedures
11.2.7 Instruction
11.3 Results and discussion
11.3.1 Outline of analyzing the experimental results
11.3.2 Agreement rate between the two bad choices
11.3.3 Tabulations of bad decisions
11.3.4 An examination of the ease of choosing the bad option in a majority-based choice
11.3.5 Logistic regression analysis on irrational decision-making
11.3.5.1 Analysis of the ease of choosing a bad option
Examination of the worst option defined by the experimental participants
11.3.5.2 Analysis of the difference between the options chosen by the group and the options chosen by majority vote
11.3.5.3 Multiple regression analysis of discussion evaluation
Analysis of overall satisfaction for discussion
11.4 Conclusion
References
12 An observational experiment in group decision-making: Can people detect bad group decisions?
12.1 Cognitive processes and groupthink in group decision-making
12.2 Pilot Study 1
12.2.1 Purpose of Pilot Study 1
12.2.2 Overview of the experiment
12.2.3 Making videos of a meeting scene (making experimental stimuli)
12.2.4 Method
12.2.5 Results
12.2.6 Discussion
12.3 Pilot Study 2
12.3.1 Purpose
12.3.2 Overview of Pilot Study 2
12.3.3 Method of Pilot Study 2
12.3.3.1 Participants of the experiment
12.3.3.2 Questionnaire items
12.3.3.3 Procedure
12.3.4 Results
12.3.5 Discussion
12.3.5.1 Creation of a meeting video
12.3.5.2 Experimental procedure
12.4 Method of the experiment
12.4.1 Creation of experimental stimuli for the experiment
12.4.2 Implementation of the experiment
12.4.2.1 General instructions
12.4.2.2 Experimental instructions
12.5 Result of experiment
12.5.1 Experiment 1
12.5.1.1 Overall results
12.5.1.2 Correlation analysis
12.5.1.3 Analysis of variance
12.5.2 Experiment 2
12.5.2.1 Overall results
12.5.2.2 Correlation analysis
12.5.2.3 Analysis of variance
12.5.2.4 Interaction between control and experimental groups
12.6 Discussion
12.6.1 Experiment 1
12.6.2 Experiment 2
12.6.3 Interaction between control and experimental groups
12.7 Conclusion
References
13 Revisiting the group decision-making experiment
13.1 Irrationality and bad decision-making in group decision-making
13.2 Preliminary survey
13.2.1 Purpose of the preliminary survey
13.2.2 Questionnaire
13.2.3 Implementation of the preliminary survey
13.2.4 Results and discussion of the preliminary survey
13.3 Method for group decision-making experiment
13.3.1 Experimental design
13.3.2 Stimulus creation
13.3.3 Questionnaire
13.3.4 Implementation of the experiment
13.3.4.1 Participants
13.3.4.2 Procedure
13.3.4.3 Instruction
13.3.6 Outline of the analysis
13.4 Results
13.4.1 Analysis of the desirability of a meeting decision
13.4.2 Analysis of the desirability of the meeting process
13.4.3 Correlation analysis
13.5 Discussion
13.5.1 Desirability of the meeting decision
13.5.2 Desirability of the meeting process
13.5.3 Correlation coefficient between desirability of decision and desirability of process in meetings
13.6 Conclusion and future prospects
References
14 The detection of bad decisions and a voting experiment
14.1 Detection of bad group decision-making and groupthink
14.2 Method of Experiment 1
14.2.1 Outline of Experiment 1
14.2.2 Experimental design
14.2.3 Experimental stimuli
14.2.4 Questionnaire
14.2.5 Implementation of the experiment
14.2.6 Instruction
14.3 Results and discussion of Experiment 1
14.3.1 Correlation analysis
14.3.2 Analysis of the desirability of decisions in meetings
14.3.3 Analysis of the desirability of the meeting process
14.3.4 Analysis of the sensitivity of the consumption deadline
14.3.5 Analysis of voting
14.4 Method of Experiment 2
14.4.1 Overview of the experiment
14.4.2 Experimental design
14.4.3 Stimuli
14.4.4 Questionnaire
14.4.5 Implementation of the experiment
14.4.6 Instruction
14.5 Results and discussion of Experiment 2
14.5.1 Correlation analysis
14.5.2 Analysis of the desirability of decisions
14.5.3 Analysis of the desirability of the meeting process
14.5.4 Analysis of consummation sensitivity
14.5.5 Analysis of voting
14.6 Conclusion and future prospects
References
15 Situation dependence of group and individual decision making and bad decisions
15.1 Decision-making strategies for individual decision-making and group decision-making by majority rule
15.2 Consequences from Condorcet’s Jury Theorem
15.3 Group decision-making in the situations where independence among group members is not ensured
15.4 Experimenton situation dependence of decision-making and bad decisions
15.4.1 Outline of the experiment
15.4.2 Decision task
15.4.3 Preliminary study
15.4.3.1 Method of preliminary experiment
Experimental participants
Procedure
15.4.3.2 Results and discussion
15.4.4 Experiment
15.4.4.1 Method of the experiment
Experimental participants
Eye-tracking equipment
Experimental procedure
15.4.4.2 Results
Eye movement measurement results
15.4.4.3 Discussion
15.5 Conclusion
References
16 The contingent focus model and bad decisions
16.1 Situation dependence of decision-making and bad decisions
16.2 Framing effect as situation-dependent preference reversal
16.3 Inadequacy of utility theory for explaining the framing effect
16.4 Prospect theory explains the framing effect and its problem
16.5 Concept of the contingent focus model
16.6 Formulation of contingent focus model
16.7 Representation theorem of contingent focus model
16.8 Conclusion and future perspective
References
17 An experiment on, and psyschometric analysis of, the contingent focus model
17.1 Risk attitudes and the contingent focus model
17.1.1 Properties of risk attitudes under the assumption of a contingent focus model
17.1.1.1 Risk aversion
17.1.1.2 Risk neutrality
17.1.1.3 Risk-seeking
17.1.2 Proof of the nature of the risk attitude
17.2 Experiment of contingent focus model and measurement
17.2.1 A simple parameter estimation method for contingent focus model
17.2.2 A simple estimation method in which the choice ratio and utility are considered to be ratio scale
17.2.3 Estimating the strength of preferences that can be rated
17.2.4 Estimation method assuming utility with error term
17.3 Experiment of contingent focus model
17.3.1 Experiment of the contingent focus model and the focusing hypothesis 1: experiment of the reflection effect
17.3.2 Experiment of the contingent focus model and the focusing hypothesis 2: Asian disease problem
17.3.3 Quantitative analysis of the experimental results
17.3.4 Testing the focusing hypothesis of the contingent focus model using the information monitoring acquisition method
17.3.4.1 Experiment 3.4.1: the Asian disease problem
17.3.4.2 Experiment 3.4.2: a variant of the Asian disease problem
17.3.4.3 Experiment 3.4.3: reflection effect problem
17.3.5 Discussion of the experimental results
17.4 Conclusion and future perspectives
References
18 The contingent focus model and its relation to other theories
18.1 Expected utility theory
18.2 A counterexample to expected utility theory: Allais paradox
18.3 Nonadditive probability and nonlinear utility theory
18.4 Why nonlinear utility theory cannot explain the framing effect
18.5 Framing effects and prospect theory
18.6 Relationship between the contingent focus model and nonlinear expected utility theory and prospect theory
18.7 Conclusion and future perspectives
References
19 The mental ruler model: Qualitative and mathematical representations of contingent judgment
19.1 Contingent judgment
19.2 Contingent judgment and the problems in its modeling
19.2.1 Contingent judgment
19.2.2 Why is it difficult to explain contingent judgment by utility theory?
19.2.3 Existing models explaining contingency of judgment
19.2.3.1 Decision frame model
19.2.3.2 Psychological purse model
19.2.3.3 Rage–frequency model
19.2.4 Problems of the previous contingent judgment models
19.3 Qualitative description of “mental ruler”
19.3.1 Basic hypothesis of the model and basic property of mental ruler
19.3.1.1 Basic property 1: the ruler has graduation
19.3.1.2 Basic property 2: the ruler length is bounded (boundedness)
19.3.1.3 Basic property 3: the ruler is one-dimensional
19.3.2 Basic function of mental ruler
19.3.2.1 Basic function 1: people construct an appropriate mental ruler depending on the situation
19.3.2.2 Basic function 2: reference points or end points of the ruler are applied differently depending on the situation
19.3.2.3 Basic function 3: graduation of the ruler becomes particularly finer around the reference point and the end points...
19.3.2.4 Basic function 4: more knowledge or more involvement creates finer graduation of the ruler
19.3.2.5 Basic function 5: even if information is given multidimensionally, a one-dimensional judgment is elicited using th...
19.3.2.6 Basic function 6: it is difficult to compare different mental rulers
19.3.3 Compatibility of stimulus-response structures as a mental ruler construction principle
19.4 Mental ruler explanation using set theory and its mathematical description
19.4.1 Definition of the situation
19.4.2 Definition of subjective situation
19.4.3 Structure of mental ruler
19.4.4 Subadditivity of the mental ruler and its mathematical description
19.4.5 Threshold as graduation of the mental ruler
19.4.6 Restructure of the subjective situation and the mental ruler
19.4.7 Mental ruler as a set function
19.5 Explanation of experimental findings
19.5.1 Interpretation of experimental results by Tversky and Kahneman
19.5.2 Interpretation of the experiment by Hsee
19.5.3 Interpretation of the evaluation experiment on the value of saved lives
19.5.4 Interpretation of the perceptual judgment experiment
19.5.5 Interpretation of price judgment experiment
19.5.6 Interpretation of probability weighting function
19.6 Conclusion and future perspectives
References
20 How attention arises in and influences decision-making
20.1 Function of attention
20.2 Psychological model of attention
20.3 Mathematical model of attention rate to social events
20.4 Propositions and considerations derived from the model
20.5 Application to the psychometric model for attention rate to Covid-19 problem
20.5.1 Purpose of the study
20.5.2 Analysis and results
20.5.3 Discussion
20.6 Control of attention by psychological experiment
20.6.1 Experiment in which the speed and acceleration of change of the target were controlled
20.6.1.1 Purpose of the study
20.6.1.2 Method of the study
20.6.1.3 Experimental results
20.6.1.4 Discussion
20.6.2 Experiments on stimulus variability and attention
20.6.2.1 Purpose of the study
20.6.2.2 Proposal of attention manipulation method
20.6.2.3 Method of the experiment
20.6.2.4 Results
20.6.2.5 Discussion
20.7 Model of category focusing and construction of mental ruler
20.7.1 Prospect theory and the mental box model
20.7.2 Category-focusing hypothesis and the mental box model
20.7.2.1 Range–frequency theory
20.7.2.2 Category-focusing hypothesis
20.7.2.3 Explanation of situation-dependent judgment phenomena by the category-focusing hypothesis
20.7.2.4 Composition of the mental ruler model from the mental box model and its relationship to the range and frequency model
20.7.3 Empirical study of mental box model
20.7.3.1 Purpose of the experiment
20.7.3.2 Method
20.7.3.3 Results
20.7.3.4 Discussions
20.8 Conclusion and future perspective
References
21 Escaping from bad decisions and future perspective
21.1 Epistemology of bad decision
21.2 Individual decision and group decision strategies
21.3 Situational dependence of individual decision-making and its psychological laws
21.4 Nudges, boosts, and metacognition
21.5 Metacognitive model of decision-making process
21.6 Conclusion
References
Author Index
Subject Index
Back Cover