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Information Presentation in Decision and Risk Analysis: Answered, Partly Answered, and Unanswered Questions.
1The Paul Merage School of Business, University of California, Irvine, Irvine, CA, USA.
Risk Analysis : an Official Publication of the Society for Risk Analysis
|September 23, 2016
Summary
Decision-makers consistently deviate from rational models due to cognitive heuristics. This research explores inconsistencies in evaluating gains and losses, identifying future research directions in decision analysis.
Area of Science:
- Decision Analysis
- Risk Analysis
- Behavioral Economics
Background:
- Established research over 30 years demonstrates divergent decision-making processes for evaluating gains, losses, delays, and surprises.
- Rational choice models predict consistent responses, yet individuals often exhibit inconsistencies.
Purpose of the Study:
- To analyze the discrepancies between rational decision models and actual human behavior in risk assessment.
- To highlight inconsistencies arising from cognitive heuristics when processing theoretically equivalent information.
- To identify and detail promising future research avenues in decision and risk analysis.
Main Methods:
- Review of 30 years of research in risk analysis, decision analysis, and economics.
- Analysis of decision-making processes concerning anticipated versus actual outcomes (losses, gains, delays, surprises).
- Identification of heuristic processes leading to behavioral inconsistencies.
Main Results:
- Decision-makers consistently employ different cognitive strategies for evaluating and combining various types of outcomes.
- Heuristic processes frequently lead to responses that contradict predictions from rational decision models.
- Inconsistencies are observed even when information is presented in theoretically equivalent formats.
Conclusions:
- Human decision-making in risk contexts is often characterized by systematic deviations from rationality.
- Understanding cognitive heuristics is crucial for bridging the gap between normative and descriptive decision theories.
- Further research is needed to address specific unanswered questions regarding decision-making inconsistencies.
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