Economic irrationality is optimal during noisy decision making

Abstract

According to normative theories, reward-maximizing agents should have consistent preferences. Thus, when faced with alternatives A, B, and C, an individual preferring A to B and B to C should prefer A to C. However, it has been widely argued that humans can incur losses by violating this axiom of transitivity, despite strong evolutionary pressure for reward-maximizing choices. Here, adopting a biologically plausible computational framework, we show that intransitive (and thus economically irrational) choices paradoxically improve accuracy (and subsequent economic rewards) when decision formation is corrupted by internal neural noise. Over three experiments, we show that humans accumulate evidence over time using a "selective integration" policy that discards information about alternatives with momentarily lower value. This policy predicts violations of the axiom of transitivity when three equally valued alternatives differ circularly in their number of winning samples. We confirm this prediction in a fourth experiment reporting significant violations of weak stochastic transitivity in human observers. Crucially, we show that relying on selective integration protects choices against "late" noise that otherwise corrupts decision formation beyond the sensory stage. Indeed, we report that individuals with higher late noise relied more strongly on selective integration. These findings suggest that violations of rational choice theory reflect adaptive computations that have evolved in response to irreducible noise during neural information processing.decision making | irrationality | choice optimality | selective integration | evidence accumulation D aily decisions, such as choosing a holiday destination or accepting a job offer, involve comparing alternatives that are characterized by different attributes (1, 2). Understanding how the brain combines information from different attributes into unitary decision values is a key challenge in psychology and the neurosciences (3, 4). From a normative perspective, the value of an alternative should be independent of factors, such as the attractiveness of competing alternatives or the context in which preferences are elicited (5). Thus, the preference relationship between two alternatives ought to remain stable, regardless of changes to the choice set, incurred for example by the addition or removal of other choice alternatives (6).However, human preferences are often driven by irrelevant factors (7,8). For instance, an initial preference for one holiday destination (e.g., Bali) over another (e.g., Berlin) can reverse when an inferior alternative (e.g., Dresden) is added to the choice set, even if this "decoy" alternative is never chosen (9, 10). Similarly, an individual preferring a holiday in Bali to Berlin, and Berlin to Boston, will sometimes show a systematic "intransitive" (or inconsistent) preference for Boston over Bali (11). A canonical argument states that such violations of decision theory (hereafter "economic" or "choice irrationality") disclose fundamental limita...

Neural Underpinnings of Decision Strategy Selection: A Review and a Theoretical Model

“…However, it draws from other models, formulated in various domains. In terms of computational assumptions, our model is similar to neuroscientific models explaining option selection in value-based choice (Louie et al, 2011, 2013; Chau et al, 2014; Hunt et al, 2014; Tsetsos et al, 2016). Our model shares computational assumptions with models by Hunt et al (2014) and Louie et al (2013).…”

“…Therefore, we think it is time to build models of decision strategy selection that can provide predictions that go beyond behavior and that can be tested in neurophysiological studies. The need to develop such models is also underlined by the fact that several neurophysiological models of multi-attribute choice already exist (Louie et al, 2013; Chau et al, 2014; Hunt et al, 2014; Tsetsos et al, 2016). These models are relevant here, because they stress the importance of brain-wide computational processes as determinants of choice—particularly, the divisive normalization, hierarchical inhibition and gain control processes.…”

Reported violations of rationality may be aggregation artifacts

“…In PNAS, Tsetsos et al (1) report intransitive preferences consistent with selective integration (SI) theory. The Condorcet paradox warns that aggregating transitive (rational) preferences readily creates intransitive (irrational) collective preferences (2).…”

“…Therefore, any study reporting intransitive behavior must guard against aggregation artifacts (3). In experiments 1-3, Tsetsos et al (1) reported significant evidence against a null and in favor of FW:P AB > 1=2 and P BC > 1=2 and P CA > 1=2 (Fig. 1), in data aggregated across participants to infer intransitive "frequent-winner" (FW) effects for "cyclic trials."…”

“…Hence, the evidence in favor of FW in the pooled data from experiments 1-4, as well as the parameter estimates for SI theory, may be artifactual. Tsetsos et al (1) should assess the robustness of every substantive claim by separately analyzing each participant and presentation order.…”