The high availability of extreme events serves resource-rational decision-making

Falk Lieder, Ming Hsu, Thomas L. Griffiths

Research output: Chapter in Book/Report/Conference proceedingConference contribution

18 Scopus citations

Abstract

Extreme events come to mind very easily and people overestimate their probability and overweight them in decision-making. In this paper we show that rational use of limited cognitive resources can generate these'availability biases.' We hypothesize that availability helps people to quickly make good decisions in very risky situations. Our analysis shows that agents who decide by simulating a finite number of possible outcomes (sampling) should over-sample outcomes with extreme utility. We derive a cognitive strategy with connections to fast-and-frugal heuristics, and we experimentally confirm its prediction that an event's extremity increases the factor by which people overestimate its frequency. Our model also explains three context effects in decision-making under risk: framing effects, the Allais paradox, and preference reversals.

Original languageEnglish (US)
Title of host publicationProceedings of the 36th Annual Meeting of the Cognitive Science Society, CogSci 2014
PublisherThe Cognitive Science Society
Pages2567-2572
Number of pages6
ISBN (Electronic)9780991196708
StatePublished - 2014
Externally publishedYes
Event36th Annual Meeting of the Cognitive Science Society, CogSci 2014 - Quebec City, Canada
Duration: Jul 23 2014Jul 26 2014

Publication series

NameProceedings of the 36th Annual Meeting of the Cognitive Science Society, CogSci 2014

Conference

Conference36th Annual Meeting of the Cognitive Science Society, CogSci 2014
Country/TerritoryCanada
CityQuebec City
Period7/23/147/26/14

All Science Journal Classification (ASJC) codes

  • Artificial Intelligence
  • Computer Science Applications
  • Human-Computer Interaction
  • Cognitive Neuroscience

Keywords

  • Bayesian
  • availability
  • bounded rationality
  • cognitive biases
  • decision-making
  • heuristics
  • judgment

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