The description–experience gap in risky choice: the role of sample size and experienced probabilities

Abstract

Risky prospects come in different forms. Sometimes options are presented with convenient descriptions summarizing outcomes and their respective likelihoods. People can thus make decisions from description. In other cases people must call on their encounters with such prospects, making decisions from experience. Recent studies report a systematic and large description-experience gap. One key determinant of this gap is people's tendency to rely on small samples resulting in substantial sampling error. Here we examine whether this gap exists even when people draw on large samples. Although smaller, the gap persists. We use the choices of the present and previous studies to test a large set of candidate strategies that model decisions from experience, including 12 heuristics, two associative-learning models and the two-stage model of cumulative prospect theory. This model analysis suggests-as one explanation for the remaining description-experience gap in large samples-that people treat probabilities differently in both types of decisions.

How choice ecology influences search in decisions from experience

“…First, we analyzed sample size data from the following published studies: Camilleri and Newell (2010), Hau et al (2008), Hertwig et al (2004), Hertwig and Pleskac (2010), and Ungemach, Chater, and Stewart (2009). All data stems from conditions implementing the sampling paradigm: Participants could freely choose how long to sample and how to allocate search across the two payoff distributions.…”

“…Consequently, we have recently learned much about the psychology of search in decisions from experience. We now know, for instance, that in the sampling paradigm (a) people tend to rely on fairly small samplesranging mostly from 11 to 19 draws, amounting to nearly 7 ± 2 draws from each distribution-thereby attenuating the impact of rare events (see Hau, Pleskac, & Hertwig, 2010, Table 1); (b) people respond to incentives such that increasing the monetary stakes substantially boosts sampling efforts (Hau, Pleskac, Kiefer, & Hertwig, 2008); (c) small samples amplify the difference between the expected average earnings, thus making the options more distinct and choice easier ; (d) people's short-term memory capacity is positively correlated with the size of the drawn sample (r = .36; Rakow, Demes, & Newell, 2008); (e) people endowed with high numeracy draw larger samples than those with low numeracy (Lejarraga, 2010); (f) people who report to have a high ability in rational thinking draw larger samples than those with low ability (Lejarraga, 2010); and (g) people tend to adopt one of two idealized search policies (piece-wise vs. round-wise search strategy, with the former involving more switching between options), with switching frequency being negatively correlated with sample size (r = À.44) and positively associated with a decision strategy conducive to rare events being underweighted (Hills & Hertwig, 2010).…”

“…The size of the description-experience gap (Hertwig & Erev, 2009) is markedly (but not exclusively) determined by sample size. For instance, by greatly increasing the financial stakes, Hau et al (2008) doubled participants' search efforts (Experiment 2: median of 33 samples relative to Hertwig et al, 2004, median of 15 samples) and found that the description-experience gap was reduced but not eliminated. Relative to such large differences in search effort, the obtained differences between gain vs. loss domain and safe vs. risky option are small.…”

Fear shapes information acquisition in decisions from experience

“…They therefore need to draw on their past experience in similar situations (e.g., crossing busy streets)-if such experience exists-or they may engage in online exploration and search for information, thus ultimately making decisions from experience rather than decisions from description (Hertwig, Barron, Weber, & Erev, 2004). In decisions from experience, the amount and the way people search for information can systematically influence their choices: For example, if a decision situation entails rare but potentially highly consequential events, people tend to learn about these events only by means of extensive and thorough exploration (Fox & Hadar, 2006;Hau, Pleskac, Kiefer, & Hertwig, 2008;Hertwig et al, 2004). But which factors shape exploration?…”

“…Additionally, researchers have examined the properties of the choice ecology (e.g., magnitude of incentives, loss versus gain domain, short-versus long-run frame; Hau et al, 2008;Lejarraga, Hertwig, & Gonzalez, 2012;Wulff, Hills, & Hertwig, submitted for publication) and the interaction of ecology and cognition (e.g., amplification effect; . While substantial progress has been made in describing how cognitive and ecological properties shape search and exploration in decisions from experience, there are still blind spots.…”