When Time Is of the Essence: Averaging, Aspiration, and the Short Run

A variety of experiments have demonstrated that people's choices among gambles differ according to whether the gamble is to be played just once (the unique case) or multiple times (the repeated case). The reason for this difference appears to be that people are acting in each case so as to increase the likelihood that the chosen alternative will leave them better off than the nonchosen alternative. This paper explores four themes that bear on the difference between unique and repeated gambles. The first traces the historical and theoretical role of weighted averaging in risky choice. The second defends the usefulness of probability-based rules for choices involving aspiration levels. The third presents the idea that choices under risk may reflect dual criteria, one based in weighted averaging and the other based in stochastic control. The fourth challenges the conventional criteria by which choices are judged to be rational or irrational.