Why more can be less: An inference-based explanation for hyper-subadditivity in bundle valuation

We conceptualize, develop, and test a multiple-item bundle valuation model through which decision makers are able to make inferences about the value of uncertain items based on the value of certain items. Results of four experiments indicate that bundling a low-value certain item with a high-value uncertain item, which are not substitutes, results in a bundle valuation lower than the value of the uncertain item alone. We refer to this highly unexpected and previously unexplained phenomenon as “hyper-subadditivity.” In addition we find that bundling a high-value certain item with a low-value uncertain item leads to superadditivity, even though the items are not complements. Hence, we find that when two objects are bundled together, and one has a more certain value, decision makers use the value of the certain item to infer the value of the less certain item. They might infer that the other (less certain) object must be worth an amount similar to the item with which they are paired. We further demonstrate that reducing uncertainty eliminates these effects, and that direct value inferencing (not simple numeric priming, nor inferences about quality) is the most likely mechanism driving these effects.     

When Does Construction Enhance Product Value? Investigating the Combined Effects of Object Assembly and Ownership on Valuation

Recent findings have shown that even without the ability to customize a product, individuals pay more for goods that they assembled. In this paper we examine which components of this creation process account for the increase in valuation, and whether it operates equally for owners and non‐owners of the self‐assembled object. Based on the self‐extension theory of ownership, we propose a psychological mechanism by which the assembly process strengthens the self–object association. In three experiments, we find that—although witnessing the assembly process or assembling a similar product can increase participants' evaluation of, and attachment to, a product that they own—a greater and more consistent increase in valuation and attachment arises when owners assemble their product themselves. Seemingly, merely learning about the assembly process plays only a small role in enhancing value; for substantial increases in value, one must actually assemble the product oneself. Contrary to the previous findings on the effects of labour on willingness to pay, we find little effect of product assembly among non‐owners of the product. We suggest that self‐assembly encourages objects to be incorporated into the self, but that this occurs most effectively when one owns the product. Copyright © 2015 John Wiley & Sons, Ltd.     

Category-bounded emotional enhancement: spillover effects in the valuation of public goods

ABSTRACT

We examined whether enhancing (vs. not enhancing) the emotionality of a referent public good influences the subsequent valuation of a target public good. We predicted that it would and that the directionality of its impact would depend on a fundamental cognitive process – categorisation. If the target and referent goods belong to the same domain, we expected that the effect on the target would be in the same direction as the emotional enhancement of the referent (assimilation effect). However, if the target and referent goods belong to different domains, we expected that the effect on the target would be either negligible or in the opposite direction to that of the emotional enhancement of the referent (null or contrast effect). In Experiment 1 we examined the impact of emotionally enhancing a referent public good on feelings towards a target public good, whereas in Experiment 2 on the willingness to contribute towards a target public good. The results support the predicted interaction, which was driven by an assimilation effect for same-domain goods and a null effect for different-domain goods. In doing so, the present findings highlight the interplay between cognition and emotion in the valuation of public goods. We discuss theoretical and practical implications.     

Asymmetric preferences for road safety: Evidence from a stated choice experiment among car drivers

Recent research has proposed fitting responses from discrete choice experiments to asymmetric value functions consistent with prospect theory, taking into account respondents’ reference points in their valuation of choice attributes. Previous studies have mainly concentrated on travel time and cost attributes, while evidence regarding road safety attributes is very limited.This paper investigates the implicit utility of a road safety attribute, defined as the number of casualties per year in alternative car trip choices, when safety improves or deteriorates. Using appropriate statistical tests we are able to reject symmetric preferences for losses and gains in the level of safety and estimate a sigmoid value function that exhibits loss aversion and diminishing sensitivity. This adds an interesting psychological dimension to the preference of road safety. Possible implications of this finding for policy making are discussed.     

Subjective valuation and asymmetrical motivational systems: implications of scope insensitivity for decision making

Studies using the Iowa Gambling Task have revealed individual differences in performance on the task. In this study, we tested the hypothesis that approach and avoidance motivations influence decision making through the process of subjective valuation. We examined the implications of a high sensitivity to gains or losses from two perspectives which we labeled scalar multiplication and valuation by feeling. Using two versions of the Iowa Gambling Task, we find evidence supporting the view that asymmetry in the systems regulating approach and avoidance leads to systematic biases that translate to differences in performance. Specifically, we find that high sensitivity in the Behavioral Activation System (BAS) translates to valuation by feeling and insensitivity to scope in the domain of gains, while high sensitivity in the Behavioral Inhibition System (BIS) translates to valuation by feeling and insensitivity to scope in the domain of losses. The basis for these findings is discussed. Copyright © 2007 John Wiley & Sons, Ltd.     

The Monty Hall dilemma in pigeons: Effect of investment in initial choice

In the Monty Hall dilemma, humans are initially given a choice among three alternatives, one of which has a hidden prize. After choosing, but before it is revealed whether they have won the prize, they are shown that one of the remaining alternatives does not have the prize. They are then asked whether they want to stay with their original choice or switch to the remaining alternative. Although switching results in obtaining the prize two thirds of the time, humans consistently fail to adopt the optimal strategy of switching even after considerable training. Interestingly, there is evidence that pigeons show more optimal switching performance with this task than humans. Because humans often view even random choices already made as being more valuable than choices not made, we reasoned that if pigeons made a greater investment, it might produce an endowment or ownership effect resulting in more human-like suboptimal performance. On the other hand, the greater investment in the initial choice by the pigeons might facilitate switching behavior by helping them to better discriminate their staying versus switching behavior. In Experiment 1, we examined the effect of requiring pigeons to make a greater investment in their initial choice (20 pecks rather than the usual 1 peck). We found that the increased response requirement facilitated acquisition of the switching response. In Experiment 2, we showed that facilitation of switching due to the increased response requirement did not result from extinction of responding to the initially chosen location.     

ASSESSING CHOICE MAKING AMONG CHILDREN WITH MULTIPLE DISABILITIES

Some learners with multiple disabilities display idiosyncratic gestures that are interpreted as a means of making choices. In the present study, we assessed the validity of idiosyncratic choice-making behaviors of 3 children with multiple disabilities. Opportunities for each child to choose between food and drink were provided under two conditions. In one condition, the children were given the food or drink item corresponding to their prior choice. In the other condition, the teacher delivered the item opposite to that chosen. It was reasoned that valid choice-making behaviors would be reflected in a greater tendency to accept the chosen item and refuse the unchosen item. Direct observations revealed all children consistently indicated choices during both conditions. Choices of both the food and drink items were made by all 3 children. A reversal design demonstrated that acts of refusal were more frequent when choices were followed by delivery of the item opposite to that chosen. Similar assessment procedures may be effective in determining the function of idiosyncratic gestures exhibited by persons with multiple disabilities. For children lacking such skills, intervention to teach valid choice-making behaviors may be needed to complement assessment procedures.     

Public and Private Values

In this paper, we experimentally examine whether looking at other people's pricing decisions is a type of a decision rule that people over‐apply even when it is not applicable, as in the case of private‐value goods. In Study 1, we find evidence that this is indeed the case—individual valuation of a subjective experience under full information, elicited using incentive compatible mechanism, is highly influenced by values of others. In Study 2, we find that people expect to use this rule to some degree with respect to actual consumption of goods, especially goods with some public value (music), and less so for private‐value goods (noise). However, people expect to use the rule to a very large extent when they are required to express their valuation of a good using a dollar figure (Study 3). These results can shed light on price behavior as rigidities and rents. Copyright © 2015 John Wiley & Sons, Ltd.     

Neural affective decision theory: Choices, brains, and emotions

We present a theory and neurocomputational model of how specific brain operations produce complex decision and preference phenomena, including those explored in prospect theory and decision affect theory. We propose that valuation and decision making are emotional processes, involving interacting brain areas that include two expectation-discrepancy subsystems: a dopamine-encoded system for positive events and a serotonin-encoded system for negative ones. The model provides a rigorous account of loss aversion and the shape of the value function from prospect theory. It also suggests multiple distinct neurological mechanisms by which information framing may affect choices, including ones involving anticipated pleasure. It further offers a neural basis for the interactions among affect, prior expectations and counterfactual comparisons explored in decision affect theory. Along with predicting the effects of particular brain disturbances and damage, the model suggests specific neurological explanations for individual differences observed in choice and valuation behaviors.     

Neighborhood Determinants of Quality of Life

In this paper we analyze various dimensions of the quality of life in Uruguay. The results suggest that differences in overall happiness and in domain satisfaction can partly be explained by different levels of access to public goods. We find that the monetary equivalent value of public goods such as electricity, running water, sewage system, drainage, waste disposal system, street lighting, sidewalks in good condition, trees in the street, and the absence of air or noise pollution is considerable.     

What a person thinks upon learning he has chosen differently from others: Nice evidence for the persuasive-arguments explanation of choice shifts

Small shifts in choice occur even without discussion, when individuals merely know each other's preference. This appears to support an interpersonal comparison explanation of group induced shifts in choice and to refute explanations based on persuasive argumentation. The present study demonstrates the contrary, that such effects are consistent with the persuasive-arguments formulation and are obtained under particular conditions specified only by the latter theory, to wit: Knowledge of other's choices is assumed to lead a person to think of reasons (arguments) others might have had for their choices-reasons which ordinarily would not come to mind without this knowledge. Such reasoning functions in the same way as persuasive argumentation during group discussion; it causes the person to persuade himself that an alternative course of action now has greater merit than the one he initially preferred. To test this analysis, an experiment was performed in which subjects responded to choice-dilemma items under three different conditions: Following their own choice (I) they learned what several others had chosen and then wrote arguments in support of alternatives given in that same item; (II) they learned what several others had chosen and then wrote arguments in support of alternatives given in a different item; and (III) they received no information about others' choices but merely wrote arguments on that item. As predicted, shifts in choice occurred only if the person knew what others chose and had an opportunity to think about the latter (condition I); they did not occur if an opportunity to think of others' choices was denied (condition II), nor if knowledge of others' choices was withheld (condition III). Content analysis of the arguments subjects produced in conditions I and II completely supported the hypothesis, as did analyses of responses to postexperimental questionnaire which directly asked the subjects about their feelings and thoughts upon learning what others had chosen.     

A Reverse Outcome Bias: The Influence of Multiple Reference Points on the Evaluation of Outcomes and Decisions

Two experiments examined the influence of multiple reference points on the evaluation of outcomes and decisions that lead to those outcomes. Norm theory is applied as a conceptual framework for understanding the conditions under which alternative norms may be evoked by the decision context and how they are subsequently used as reference points in the evaluation process. Of primary interest, in these studies, was how an outcome is evaluated when two reference points, the status quo and an evoked alternative, provide conflicting information about the "goodness" of the outcome (the outcome is good from the perspective of one reference point and bad from the perspective of the other). A gambling paradigm, based on regret theory, is employed to address these questions. We find that an alternative outcome is more likely to be evoked as a reference point when: (1) it is certain that another choice would have led to the alternative outcome; (2) a social comparison other receives the alternative outcome; and (3) the alternative outcome is in a different evaluative domain than the outcome received (i.e., is negative when the outcome received is positive). When these conditions hold, and the alternative outcome is used as a reference point for evaluation, the evaluations which result are quite counterintuitive: winners are rated as more regretful over their choices than losers are considered to be less satisfied with their outcomes than losers, and are rated as having made poorer quality decision than losers, who made the same choice! The latter finding represents a complete reversal of the outcome bias often observed in judgments of decisions made under uncertainty.     

Choice Blindness and Preference Change: You Will Like This Paper Better If You (Believe You) Chose to Read It!

Choice blindness is the finding that participants both often fail to notice mismatches between their decisions and the outcome of their choice and, in addition, endorse the opposite of their chosen alternative. But do these preference reversals also carry over to future choices and ratings? To investigate this question, we gave participants the task of choosing which of a pair of faces they found most attractive. Unknown to them, we sometimes used a card trick to exchange one face for the other. Both decision theory and common sense strongly suggest that most people would easily notice such a radical change in the outcome of a choice. But that was not the case: no more than a third of the exchanges were detected by the participants. We also included a second round of choices using the same face pairs, and two stages of post‐choice attractiveness ratings of the faces. This way we were able to measure preference strength both as choice consistency and by looking at measures of rating differences between chosen and rejected options. We found that the initially rejected faces were chosen more frequently in the second choice, and the perceived attractiveness of these faces was increased even in uncoupled individual ratings at the end of the experiment. This result is discussed in relation to Chen and Risen's recent criticism of the Free Choice Paradigm, as it shows that choices can affect future preferences. Copyright © 2013 John Wiley & Sons, Ltd.     

Gift Cards and Mental Accounting: Green‐lighting Hedonic Spending

In three studies, we examine the mental accounting rules that govern how gift cards are used. We predicted that their identity as gift cards would shift consumption from utilitarian to hedonic goods even in contexts where both types of goods are available and the consumer's needs are unchanged. In Study 1a, participants were asked to imagine that they had both a gift card and a specified amount of cash and needed to purchase both a hedonic item and a utilitarian item. When asked which currency they would use to buy which item, respondents were significantly more likely to say they would use the gift card to buy the hedonic item. Study 1b replicated this result and found that it was tied to participants' beliefs how different types of money should be used. In Study 2, we found that participants who were required to spend a certain amount of their compensation in a laboratory store spent more on hedonic goods if their payment was in the form of a gift card. In Study 3, we analyzed transactions at a campus bookstore and found that shoppers tended to spend disproportionately on hedonic goods when using their gift cards than when making credit card purchases. Taken together, these studies indicate that people tend to assign the monetary value of a gift card to a hedonic mental account and spend it accordingly. Copyright © 2014 John Wiley & Sons, Ltd.     

To Be or Never to Have Been: Anti-Natalism and a Life Worth Living

David Benatar argues that being brought into existence is always a net harm and never a benefit. I disagree. I argue that if you bring someone into existence who lives a life worth living (LWL), then you have not all things considered wronged her. Lives are worth living if they are high in various objective goods and low in objective bads. These lives constitute a net benefit. In contrast, lives worth avoiding (LWA) constitute a net harm. Lives worth avoiding are net high in objective bads and low in objective goods. It is the prospect of a LWA that gives us good reason to not bring someone into existence. Happily, many lives are not worth avoiding. Contra Benatar, many are indeed worth living. Even if we grant Benatar his controversial asymmetry thesis, we have no reason to think that coming into existence is always a net harm.     

The Effect of Other-Oriented Values on Decision Making: A Test of Propositions of a Theory of Concern for Others in Organizations

Based on recent theoretical work by Simon (1990, 1993), we proposed that the value of concern for others would reflect a general process whereby individuals place less value on personal outcomes and are less disposed to engage in rational calculations involving costs and benefits. We conducted two studies to examine whether these mechanisms generalize to situations that do not involve helping others. In the first study, persons high in concern for others were less attracted to choices involving the prospect of personal gain and were less discerning about the value and risk involved in making choices than were individuals low in concern for others. The second study showed that positive affective arousal, which is likely to focus attention on personal concerns, moderated the effects observed in the first study. Results suggest that other-oriented values such as concern for others may have a substantial impact on a wide range of organizational processes beyond helping.     

The effect of imperfect memory recall on risk preferences

People often take on different levels of risk when deciding on future actions compared with when they take actions with immediate consequences. The presently reported research investigated how imperfect recall of previously chosen options influences temporal fluctuations in risk preferences. In two incentivized studies with a waiting time before decision resolution (a 4-week waiting period from an initial decision), we observed that errors in the recall of previous choices played a substantial role in constructing risk preferences for choices that are usually resolved after a delay. More specifically, in a first study, we found that after a waiting period (i.e., after participants waited for their risky choices to be resolved), participants perceived that they took less risk during their initial choices than they actually did. Importantly, when asked about whether they would change their initial choices, participants declared that they would take riskier choices. In a second study, we tested directly whether such a shift in initial choices could also be demonstrated behaviorally. Results revealed that after beliefs about past choices were induced, participants changed their risk preferences in line with the information presented during belief induction.     

Applications of Prospect Theory to Political Science

Prospect theory is an alternative theory of choice under conditions of risk, and deviates from expected utility theory by positing that people evaluate choices with respect to gains and losses from a reference point. They tend to overweight losses with respect to comparable gains and engage in risk-averse behavior with respect to gains and risk-acceptant behavior with respect to losses. They also respond to probabilities in a non-linear manner. I begin with an overview of prospect theory and some of the evidence upon which it is based, and then consider some of the implications of the theory for American politics, international relations, and the law. I end with a brief discussion of some of the conceptual and methodological problems confronting the application of prospect theory to the study of politics.     

Subjective value of risky foods for individual domestic chicks: a hierarchical Bayesian model

For animals to decide which prey to attack, the gain and delay of the food item must be integrated in a value function. However, the subjective value is not obtained by expected profitability when it is accompanied by risk. To estimate the subjective value, we examined choices in a cross-shaped maze with two colored feeders in domestic chicks. When tested by a reversal in food amount or delay, chicks changed choices similarly in both conditions (experiment 1). We therefore examined risk sensitivity for amount and delay (experiment 2) by supplying one feeder with food of fixed profitability and the alternative feeder with high- or low-profitability food at equal probability. Profitability varied in amount (groups 1 and 2 at high and low variance) or in delay (group 3). To find the equilibrium, the amount (groups 1 and 2) or delay (group 3) of the food in the fixed feeder was adjusted in a total of 18 blocks. The Markov chain Monte Carlo method was applied to a hierarchical Bayesian model to estimate the subjective value. Chicks undervalued the variable feeder in group 1 and were indifferent in group 2 but overvalued the variable feeder in group 3 at a population level. Re-examination without the titration procedure (experiment 3) suggested that the subjective value was not absolute for each option. When the delay was varied, the variable option was often given a paradoxically high value depending on fixed alternative. Therefore, the basic assumption of the uniquely determined value function might be questioned.