Philosophy of Probability, Misc

Bài mới xuất bản vào ngày 19-5-2020 với tác giả liên lạc là NCS Nguyễn Minh Hoàng, cán bộ nghiên cứu của Trung tâm ISR, trình bày tiếp cận thống kê Bayesian cho việc nghiên cứu dữ liệu khoa học xã hội. Đây là kết quả của định hướng Nhóm nghiên cứu SDAG được nêu rõ ngay từ ngày 18-5-2019.

MỘT SỐ QUÁ TRÌNH NGẪU NHIÊN CÓ BƯỚC NHẢY -/- Hoàng Thị Phương Thảo -/- Luận án Tiến sỹ -/- TRƯỜNG ĐẠI HỌC KHOA HỌC TỰ NHIÊN ĐẠI HỌC QUỐC GIA HÀ NỘI -/- Hà Nội - 2015 .

Why are conditional degrees of belief in an observation E, given a statistical hypothesis H, aligned with the objective probabilities expressed by H? After showing that standard replies are not satisfactory, I develop a suppositional analysis of conditional degree of belief, transferring Ramsey’s classical proposal to statistical inference. The analysis saves the alignment, explains the role of chance-credence coordination, and rebuts the charge of arbitrary assessment of evidence in Bayesian inference. Finally, I explore the implications of this analysis for Bayesian (...) reasoning with idealized models in science. (shrink)

Charles Stein discovered a paradox in 1955 that many statisticians think is of fundamental importance. Here we explore its philosophical implications. We outline the nature of Stein’s result and of subsequent work on shrinkage estimators; then we describe how these results are related to Bayesianism and to model selection criteria like AIC. We also discuss their bearing on scientific realism and instrumentalism. We argue that results concerning shrinkage estimators underwrite a surprising form of holistic pragmatism.

Par risques majeurs, on entend ceux qui s’attachent à des événements dont les conséquences défavorables, pour l’humanité ou pour l’environnement, sont d’une gravité exceptionnelle. On n’ajoutera ni que ces événements sont d’une intensité physique extrême, ni qu’ils surviennent rarement, car ce n’est pas toujours le cas. Seuls des risques majeurs de nature civile seront considérés dans cet ouvrage, et il s'agira, plus limitativement, de risques naturels, comme ceux d’inondation et de submersion marine, illustrés par la tempête Xynthia en 2010, de (...) risques technologiques industriels, comme celui d’une explosion d'usine, illustré par la catastrophe AZF en 2001, et de risques nucléaires, pour autant qu’ils mettent en jeu les dangers de la radioactivité, et qu’illustrent, hors de France, les catastrophes de Three Miles Island (1979), Tchernobyl (1986) et Fukushima (2011), -/- Conçu comme un rapport destiné au Conseil d'analyse économique (CAE) du Premier Ministre français, l'ouvrage comporte une introduction traitant du risque majeur pris en général (section 1). Dans sa partie principale, il aborde les trois risques majeurs qu'il a sélectionnés à travers les prismes successifs de la géographie et de la technologie (section 2), de l’histoire institutionnelle et juridique (section 3), enfin d’un bilan normatif accompagné de recommandations pour l'action publique (section 4). -/- Neuf compléments spécialisés, dus à d'autres auteurs, complètent l'ouvrage. Ils portent sur des aspects technologiques (F. Ménage; A. Quantin et D. Moucoulon; P. Saint-Raymond), juridiques (V. Sanseverino-Godfrin), économiques généraux (C. Grislain-Letrémy et B. Villeneuve; R. Lahidji; J. Percebois; A. Schmitt et S. Spaeter) et financiers (M. Pappalardo) et ils concernent principalement le risque nucléaire. -/- Dans cet ensemble de vaste format, on espère avoir su proposer, non seulement des évaluations et des préconisations destinées aux pouvoirs publics, comme il convenait au projet initial de rapport, mais aussi une synthèse qui soit utilisable par tous ceux - décideurs, scientifiques ou simples observateurs - que préoccupent les questions de risques majeurs. (shrink)

Probability is a central concept in utilitarian moral theory, almost impossible to do without. I attempt to clarify the role of probability, so that we can be clear about what we are aiming for when we apply utilitarian theory to real cases. I point out the close relationship between utilitarianism and expected-utility theory, a normative standard for individual decision-making. I then argue that the distinction between “ambiguity” and risk is a matter of perception. We do not need this distinction in (...) the theory itself. In order to make this argument I rely on the personalist theory of probability, and I try to show that, within this theory, we do not need to give up completely on the idea that a “true probability” exists. Finally, I discuss several examples of applied utilitarianism, emphasizing the role of probability in each example: reasonable doubt, the precautionary principle in risk regulation, charity, climate change, and voting. (shrink)

(This is for the series Elements of Decision Theory published by Cambridge University Press and edited by Martin Peterson) -/- Our beliefs come in degrees. I believe some things more strongly than I believe others. I believe very strongly that global temperatures will continue to rise during the coming century; I believe slightly less strongly that the European Union will still exist in 2029; and I believe much less strongly that Cardiff is east of Edinburgh. My credence in something is (...) a measure of the strength of my belief in it; it represents my level of confidence in it. These are the states of mind we report when we say things like ‘I’m 20% confident I switch off the gas before I left' or ‘I’m 99.9% confident that it is raining outside'. -/- There are laws that govern these credences. For instance, I shouldn't be more confident that sea levels will rise by over 2 metres in the next 100 years than I am that they'll rise by over 1 metre, since the latter is true if the former is. This book is about a particular way we might try to establish these laws of credence: the Dutch Book arguments (For briefer overviews of these arguments, see Alan Hájek’s entry in the Oxford Handbook of Rational and Social Choice and Susan Vineberg’s entry in the Stanford Encyclopaedia.) -/- We begin, in Chapter 2, with the standard formulation of the various Dutch Book arguments that we'll consider: arguments for Probabilism, Countable Additivity, Regularity, and the Principal Principle. In Chapter 3, we subject this standard formulation to rigorous stress-testing, and make some small adjustments so that it can withstand various objections. What we are left with is still recognisably the orthodox Dutch Book argument. In Chapter 4, we set out the Dutch Strategy argument for Conditionalization. In Chapters 5 and 6, we consider two objections to Dutch Book arguments that cannot be addressed by making small adjustments. Instead, we must completely redesign those arguments, replacing them with ones that share a general approach but few specific details. In Chapter 7, we consider a further objection to which I do not have a response. In Chapter 8, we'll ask what happens to the Dutch Book arguments if we change certain features of the basic framework in which we've been working: first, we ask how Dutch Book arguments fare when we consider credences in self-locating propositions, such as It is Monday; second, we lift the assumption that the background logic is classical and explore Dutch Book arguments for non-classical logics; third, we lift the assumption that an agent's credal state can be represented by a single assignment of numerical values to the propositions she considers. In Chapter 9, we present the mathematical results that underpin these arguments. (shrink)

The paper will compare two methods used in the design of diagnostic strategies. The first one is a method that precises predictive value of diagnostic tests. The second one is based on the use of Bayes’ theorem. The main aim of this article is to identify the epistemological assumptions underlying both of these methods. For the purpose of this objective, example projects of one and multi-stage diagnostic strategy developed using both methods will be considered.

Abstract: Four main forms of Doomsday Argument (DA) exist—Gott’s DA, Carter’s DA, Grace’s DA and Universal DA. All four forms use different probabilistic logic to predict that the end of the human civilization will happen unexpectedly soon based on our early location in human history. There are hundreds of publications about the validity of the Doomsday argument. Most of the attempts to disprove the Doomsday Argument have some weak points. As a result, we are uncertain about the validity of DA (...) proofs and rebuttals. In this article, a meta-DA is introduced, which uses the idea of logical uncertainty over the DA’s validity estimated based on a virtual prediction market of the opinions of different scientists. The result is around 0.4 for the validity of some form of DA, and even smaller for “Strong DA”, which predicts the end of the world in the near term. We discuss many examples of the validity of the DA in real life as an instrument to prove it “experimentally”. We also show that DA becomes strongest if it is based on the idea of the “natural reference class” of observers, that is, the observers who know about the DA (i.e. a Self-Referenced DA). Such a DA predicts that there is a high probability of a global catastrophe with human extinction in the 21st century, which aligns with what we already know based on analysis of different technological risks. (shrink)

Let a miracle-like event be an event that is seemingly indicative of the existence of an all-good, all-knowing and all-powerful being, and yet might occur in a naturalistic world, though this would be very improbable. Suppose that a third-person report is equally as reliable as a first-person experience of such a miracle-like event — which avoids Hume’s objection to the evidential value of reports of miracles. The question addressed in this chapter is: Is it the case that, under the assumption (...) of equal reliability, a first-person experience still has greater evidential weight than a third-person report of a miracle-like event? William James (1902) answers this question affirmatively, whereas William Alston (1991) argues that they should have equal evidential weight. An appeal to Shafer’s protocols (1985) provides qualified support to James’ position in this controversy. (shrink)

The Dutch Book Argument for Probabilism assumes Ramsey's Thesis (RT), which purports to determine the prices an agent is rationally required to pay for a bet. Recently, a new objection to Ramsey's Thesis has emerged (Hedden 2013, Wronski & Godziszewski 2017, Wronski 2018)--I call this the Expected Utility Objection. According to this objection, it is Maximise Subjective Expected Utility (MSEU) that determines the prices an agent is required to pay for a bet, and this often disagrees with Ramsey's Thesis. I (...) suggest two responses to Hedden's objection. First, we might be permissive: agents are permitted to pay any price that is required or permitted by RT, and they are permitted to pay any price that is required or permitted by MSEU. This allows us to give a revised version of the Dutch Book Argument for Probabilism, which I call the Permissive Dutch Book Argument. Second, I suggest that even the proponent of the Expected Utility Objection should admit that RT gives the correct answer in certain very limited cases, and I show that, together with MSEU, this very restricted version of RT gives a new pragmatic argument for Probabilism, which I call the Bookless Pragmatic Argument. (shrink)

Comparativism is the view that comparative beliefs (e.g., believing p to be more likely than q) are more fundamental than partial beliefs (e.g., believing p to some degree x), with the latter explicable as theoretical constructs designed to facilitate reasoning about patterns within systems of comparative beliefs that exist under special conditions. In this paper, I fi rst outline several varieties of comparativism, including two `Ramseyan' varieties which generalise the standard `probabilistic' approaches. I then provide a general critique that applies (...) to any and all comparativist views. Ultimately, there are too many things that we ought to be able to say about partial beliefs that comparativism renders unintelligible. Moreover, there are alternative ways to account for the measurement of belief that need not face the same expressive limitations. (shrink)

Some conditions are given to ensure that for a jump homogeneous Markov process $\{X(t),t\ge 0\}$ the law of the integral functional of the process $T^{-1/2} \int^T_0\varphi(X(t))dt$ converges to the normal law $N(0,\sigma^2)$ as $T\to \infty$, where $\varphi$ is a mapping from the state space $E$ into $\bbfR$.

In this work we consider the problem of the approximate hedging of a contingent claim in the minimum mean square deviation criterion. A theorem on martingale representation in case of discrete time and an application of the result for semi-continuous market model are also given.

This paper is concerned with representations of belief by means of nonadditive probabilities of the Dempster-Shafer (DS) type. After surveying some foundational issues and results in the D.S. theory, including Suppes's related contributions, the paper proceeds to analyze the connection of the D.S. theory with some of the work currently pursued in epistemic logic. A preliminary investigation of the modal logic of belief functions à la Shafer is made. There it is shown that the Alchourrron-Gärdenfors-Makinson (A.G.M.) logic of belief change (...) is closely related to the D.S. theory. The final section compares the critique of Bayesianism which underlies the present paper with some important objections raised by Suppes against this doctrine. -/- . (shrink)

What is required for an action to promote the satisfaction of a desire? We reject extant answers and propose an alternative. Our account differs from competing answers in two ways: first, it is contrastive, in that actions promote the satisfaction of desires only as contrasted with other possible actions. Second, it employs a notion of expected fit between desire and world, defined as the weighted sum of the fit between the desire and the world in all possible outcomes, where each (...) weight is given by the probability of the agent’s obtaining the relevant outcome. According to our proposal, then, an action promotes a desire when the expected fit for the desire given that the agent performs the action is greater than the expected fit of the desire given that the agent performs the contrasting action. We highlight this account’s attractive features and explain how it improves on its competitors. (shrink)

Review of Dawid, Twining & Vasileki 'Evidence, Inference and Inquiry' (2011).

The problem of inferring probability comparisons between events from an initial set of comparisons arises in several contexts, ranging from decision theory to artificial intelligence to formal semantics. In this paper, we treat the problem as follows: beginning with a binary relation ≥ on events that does not preclude a probabilistic interpretation, in the sense that ≥ has extensions that are probabilistically representable, we characterize the extension ≥+ of ≥ that is exactly the intersection of all probabilistically representable extensions of (...) ≥. This extension ≥+ gives us all the additional comparisons that we are entitled to infer from ≥, based on the assumption that there is some probability measure of which ≥ gives us partial qualitative information. We pay special attention to the problem of extending an order on states to an order on events. In addition to the probabilistic interpretation, this problem has a more general interpretation involving measurement of any additive quantity: e.g., given comparisons between the weights of individual objects, what comparisons between the weights of groups of objects can we infer? (shrink)

The main point of the paper is to show how popular probabilistic measures of incremental confirmation and statistical relevance with qualitatively different features can be embedded smoothly in generalized parametric families. In particular, I will show that the probability difference, log probability ratio, log likelihood ratio, odds difference, so-called improbability difference, and Gaifman’s measures of confirmation can all be subsumed within a convenient biparametric continuum. One intermediate step of this project may have interest on its own, as it provides a (...) unified representation of graded belief of which both probabilities and odds are special cases. (shrink)

In this paper we consider conditional random quantities (c.r.q.’s) in the setting of coherence. Based on betting scheme, a c.r.q. X|H is not looked at as a restriction but, in a more extended way, as \({XH + \mathbb{P}(X|H)H^c}\) ; in particular (the indicator of) a conditional event E|H is looked at as EH + P(E|H)H c . This extended notion of c.r.q. allows algebraic developments among c.r.q.’s even if the conditioning events are different; then, for instance, we can give a (...) meaning to the sum X|H + Y|K and we can define the iterated c.r.q. (X|H)|K. We analyze the conjunction of two conditional events, introduced by the authors in a recent work, in the setting of coherence. We show that the conjoined conditional is a conditional random quantity, which may be a conditional event when there are logical dependencies. Moreover, we introduce the negation of the conjunction and by applying De Morgan’s Law we obtain the disjoined conditional. Finally, we give the lower and upper bounds for the conjunction and disjunction of two conditional events, by showing that the usual probabilistic properties continue to hold. (shrink)

B.K.Matilal, and earlier J.F.Staal, have suggested a reading of the `Nyaya five limb schema' (also sometimes referred to as the Indian Schema or Hindu Syllogism) from Gotama's Nyaya-Sutra in terms of a binary occurrence relation. In this paper we provide a rational justification of a version of this reading as Analogical Reasoning within the framework of Polyadic Pure Inductive Logic.

Autism has been defined as a disorder of social cognition, interaction and communication where ritualistic, repetitive behaviors are commonly observed. But how should we understand the behavioral and cognitive differences that have been the main focus of so much autism research? Can high-level cognitive processes and behaviors be identified as the core issues people with autism face, or do these characteristics perhaps often rather reflect individual attempts to cope with underlying physiological issues? Much research presented in this volume will point (...) to the latter possibility, i.e. that people on the autism spectrum cope with issues at much lower physiological levels pertaining not only to Central Nervous Systems (CNS) function, but also to peripheral and autonomic systems (PNS, ANS) (Torres, Brincker, et al. 2013). The question that we pursue in this chapter is what might be fruitful ways of gaining objective measures of the large-scale systemic and heterogeneous effects of early atypical neurodevelopment; how to track their evolution over time and how to identify critical changes along the continuum of human development and aging. We suggest that the study of movement variability—very broadly conceived as including all minute fluctuations in bodily rhythms and their rates of change over time (coined micro-movements (Figure 1A-B) (Torres, Brincker, et al. 2013))—offers a uniquely valuable and entirely objectively quantifiable lens to better assess, understand and track not only autism but cognitive development and degeneration in general. This chapter presents the rationale firstly behind this focus on micro-movements and secondly behind the choice of specific kinds of data collection and statistical metrics as tools of analysis (Figure 1C). In brief the proposal is that the micro-movements (defined in Part I – Chapter 1), obtained using various time scales applied to different physiological data-types (Figure 1), contain information about layered influences and temporal adaptations, transformations and integrations across anatomically semi-independent subsystems that crosstalk and interact. Further, the notion of sensorimotor re-afference is used to highlight the fact that these layered micro-motions are sensed and that this sensory feedback plays a crucial role in the generation and control of movements in the first place. In other words, the measurements of various motoric and rhythmic variations provide an access point not only to the “motor systems”, but also access to much broader central and peripheral sensorimotor and regulatory systems. Lastly, we posit that this new lens can also be used to capture influences from systems of multiple entry points or collaborative control and regulation, such as those that emerge during dyadic social interactions. (shrink)

We present a puzzle about knowledge, probability and conditionals. We show that in certain cases some basic and plausible principles governing our reasoning come into conflict. In particular, we show that there is a simple argument that a person may be in a position to know a conditional the consequent of which has a low probability conditional on its antecedent, contra Adams’ Thesis. We suggest that the puzzle motivates a very strong restriction on the inference of a conditional from a (...) disjunction. (shrink)

This collection of essays is on the relation between probabilities, especially conditional probabilities, and conditionals. It provides negative results which sharply limit the ways conditionals can be related to conditional probabilities. There are also positive ideas and results which will open up areas of research. The collection is intended to honour Ernest W. Adams, whose seminal work is largely responsible for creating this area of inquiry. As well as describing, evaluating, and applying Adams's work the contributions extend his ideas in (...) directions he may or may not have anticipated, but that he certainly inspired. In addition to a wide range of philosophers of science, the volume should interest computer scientists and linguists. (shrink)

Clear-cut cases of decision-making under risk (known probabilities) are unusual in real life. The gambler’s decisions at the roulette table are as close as we can get to this type of decision-making. In contrast, decision-making under uncertainty (unknown probabilities) can be exemplified by a decision whether to enter a jungle that may contain unknown dangers. Life is usually more like an expedition into an unknown jungle than a visit to the casino. Nevertheless, it is common in decision-supporting disciplines to proceed (...) as if reasonably reliable probability estimates were available for all possible outcomes, i.e. as if the prevailing epistemic conditions were analogous to those of gambling at the roulette table. This mistake can be called the tuxedo fallacy . It is argued that traditional engineering practices such as safety factors and multiple safety barriers avoid this fallacy and that they therefore manage uncertainty better than probabilistic risk analysis (PRA). PRA is a useful tool, but it must be supplemented with other methods in order not to limit the analysis to dangers that can be assigned meaningful probability estimates. (shrink)

Sections 1-6 contain a novel and perspicuous proof procedure for elementary quantification theory, which is "effective" in the sense that it will produce a proof of a theorem-candidate S if such a proof exists. In sections 7 and 8 a general theory of modalities is introduced, and the proof procedures are extended to the resulting systems. -- A. R. A.

Research on human decision making is at the present time undergoing rapid changes. From previously being much focused on models and approaches with an origin in economy, much of the present day research finds its inspiration from disciplinary approaches concerned with incorporating more of the context that the decision making takes place in. This context includes psychological aspects of the decision maker and social-cultural aspects of the situation he or she acts in. All human decision making occurs in dynamically changing (...) contexts. One factor contributing to this is that human beings or groups in many situations act as entrepreneurs trying to improve the situation for themselves or their organization. Given that this is the case, it is of increasing interest for both researchers and practitioners interested in the social aspects of decision making to consider the relation between creativity and decision making. (shrink)

Several studies have shown that preference is not necessarily synonymous with choice. In particular, the most preferred object from a set of objects presented in a non—choice context is not necessarily chosen when the same objects are options in a choice situation (Lichtenstein & Slovic, 1971, 1973; Tversky, Sattah, & Slovic, 1988) . Our research on the choice—preference discrepancy replicates these findings and thus bears some resemblance to the study by Tversky, Sattah, and Slovic (1988). Two competing explanations are tested.

In the present study it was shown that both decision heuristics and social value orientation play important roles in the building of preferences. This was revealed in decision tasks in which participants were deciding about candidates for a job position. An eye-tracking equipment was applied in order to register participants´ information acquisition. It was revealed that participants performing well on a series of heuristics tasks (availability, representativeness, anchoríng & adjustment,and attribution) including a confidence judgment also behaved more accurately than low (...) performers in the fulfillment of the preference tasks. It was also established that the high performers were not as influenced by whether uncertainty was presented in terms of probabilities or in terms of frequencies as was the low performers. With regard to social value orientation the results revealed that decision processing differences were more systematic between cooperators and competitors than between cooperators and individualists. Also, the cooperators did not seem to attend more to proenvironmental goals than to profit goals in the evaluation of the candidates. Finally, it was shown that accountable cooperators invested more time in their decisions than those that were not accountable, and that no such difference was observed between accountable and not accountable competitors or individualists. (shrink)

Two experiments with undergraduates as subjects were carried out with the aim of replicating and extending previous results showing that the implication of the behavioral life-cycle hypothesis (H. M. Shefrin & R. H. Thaler, 1988) that people classify assets in different mental accounts (current income, current assets, and future income) may explain how consumption choices are influenced by temporary income changes. In both experiments subjects made fictitious choices between paying for a good in cash or according to a more expensive (...) installment plan after they had received an income which was either less, the same, or larger than usual. In Experiment 1 subjects were supposed to have savings so that the total assets were equal, whereas in Experiment 2 the total assets varied. The results of both experiments supported the role of mental accounts in demonstrating that subjects were unwilling to pay in cash after an income decrease even though they had access to saved money. Thus, in effect they chose to pay more for the good than they had to. Indicating a need for further refinement of the concept of mental account, choices to pay in cash after an income decrease tended to be more frequent when the consumption and savings motives were compatible than when they were incompatible. Furthermore, increasing the total assets made subjects more willing to pay in cash after an income decrease. (shrink)

According to normative decision theory there exists a principle of procedure invariance which states that a decision maker's preference order should remain the same, independently of which response mode is used. For example, the decision maker should express the same preference independently of whether he or she has to judge or decide. Nevertheless, previous research in behavioral decision making has suggested that judgments and choices yield different preference orders in both the risky and the riskless domain. In the latter, the (...) prominence effect has been demonstrated. The main purpose of the present series of experiments was to test cognitive explanations which account for the prominence effect. One of the explanations provided a psychological account based primarily on decision-strategy compatibility. Two other explanations built on information structuring approaches. In the first one, the general idea was that decision makers differentiate between alternatives by value and belief restructuring. In the second approach, violations of invariance were assumed to be attributed to the information structure of the task which in many cases demand problem simplification. A prominence effect was in most experiments found for both choices and preference ratings. This finding spöke against the strategy compatibility explanation. Instead, the different forms of cognitive restructuring provided a better account. However, none of these provided a single explanation. Yet, the structure compatibility explanation appeared to be the more viable one, in particular of the relation between experimentäl manipulations and response mode outcomes. The predictions of the value-belief restructuring explanation, on the other hand, seemed to be more valid for the prominence effect found in choice than for preference ratings. (shrink)

It is argued that the design of decisions is a process that in many ways is shaped by social factors such as identities, values, and influences. To be able to understand how these factors impact organizational decisions, the focus must be set on the management level. It is the management that shoulders the chief responsibility for designing collective actions, such as decisions. Our propositions indicate that the following measures must be taken in order to improve the quality of organizational decisions: (...) 1. The identity of the people, involved in organizational decision making, affects the quality of decisions and should be taken into account in the design of decisions. 2. The decision maker or designer of decisions should engage the members of an organization to create a shared vision. 3. Getting the members of an organization to express and share common values should improve the decision making process. 4. Being able to socially influence the members of an organization, or other stakeholders involved, as well as letting them participate in the process, should improve the quality of decisions. (shrink)

This volume presents research that integrates decision making and creativity within the social contexts in which these processes occur. The volume is an essential addition to and expansion of recent approaches to decision making. Such approaches attempt to incorporate more of the psychological and socio-cultural context in which human decision making takes place. The authors come from different disciplines and also belong to a broad spectrum of research traditions. They present innovative chapters dealing with both theoretical and empirical aspects of (...) decision making in different personal and organizational contexts. All chapters are written from the perspective that human decision making is inherently social and more or less creative. The volume addresses fundamental questions about the nature of human decision making as it occurs in different social contexts. Thereby, it becomes essential reading for researchers in decision making and for advanced students in psychology, management science, informatics, and related disciplines. (shrink)

This paper attempts to delineate the interaction between trust, emotion, and ethical decision making. The authors first propose that trust can either incite an individual toward ethical decisions or drag him or her away from ethical decisions, depending on different situations. The authors then postulate that the feeling of guilt is central in understanding how trust affects the ethical decision making process. Several propositions based on these assumptions are introduced and implications for practice discussed.

This chapter discusses different perspectives and trends in social decision making, especially the actual processes used by humans when they make decisions in their everyday lives or in business situations. The chapter uses cognitive psychological techniques to break down these processes and set them in their social context. Most of our decisions are made in a social context and are therefore influenced by other people. If you are at an auction and bidding on a popular item, you will try to (...) guess how long the others will keep in the bidding race. Likewise, when you and another person have to coordinate your decision to win a card game you will also try to think about what the other person know and what s/he will do, so you can adjust your choice. In other words, you are trying to come up with a model of the person and his decision-making process. This involves the capability to think about the thoughts and intentions of others, to put yourself in another person's shoes (perspective taking), and to think recursively about your and another person's over several steps (like in a game of chess). Especially, recursive social reasoning is one of the hallmarks of social decision-making. Whereas observational, competitive and cooperative decision-making can all be seen as trying to maximize the own reward or profit, altruistic decision-making blatantly violates this axiomatic principle of behavioral economics. Yet, altruistic behavior is quite common throughout human society. -/- . (shrink)

Mental accounting is a concept associated with the work of Richard Thaler. According to Thaler, people think of value in relative rather than absolute terms. They derive pleasure not just from an object’s value, but also the quality of the deal – its transaction utility (Thaler, 1985). In addition, humans often fail to fully consider opportunity costs (tradeoffs) and are susceptible to the sunk cost fallacy. Why are people willing to spend more when they pay with a credit card than (...) cash (Prelec & Simester, 2001)? Why would more individuals spend $10 on a theater ticket if they had just lost a $10 bill than if they had to replace a lost ticket worth $10 (Kahneman & Tversky, 1984)? Why are people more likely to spend a small inheritance and invest a large one (Thaler, 1985)? According to the theory of mental accounting, people treat money differently, depending on factors such as the money’s origin and intended use, rather than thinking of it in terms of the “bottom line” as in formal accounting (Thaler, 1999). An important term underlying the theory is fungibility, the fact that all money is interchangable and has no labels. In mental accounting, people treat assets as less fungible than they really are. Even seasoned investors are susceptible to this bias when they view recent gains as disposable “house money” (Thaler & Johnson, 1990) that can be used in high-risk investments. In doing so, they make decisions on each mental account separately, losing out the big picture of the portfolio. (See also partitioning and pain of paying for ideas related to mental accounting.) . (shrink)

Intertemporal choice is the study of how people make choices about what and how much to do at various points in time, when choices at one time influence the possibilities available at other points in time. These choices are influenced by the relative value people assign to two or more payoffs at different points in time. Most choices require decision-makers to trade off costs and benefits at different points in time. These decisions may be about savings, work effort, education, nutrition, (...) exercise, health care and so forth. Since early in the twentieth century, economists have analyzed intertemporal decisions using the discounted utility model, which assumes that people evaluate the pleasures and pains resulting from a decision in much the same way that financial markets evaluate losses and gains, exponentially 'discounting' the value of outcomes according to how delayed they are in time. Discounted utility has been used to describe how people actually make intertemporal choices and it has been used as a tool for public policy. Policy decisions about how much to spend on research and development, health and education all depend on the discount rate used to analyze the decision. (shrink)

This chapter focuses on the psychological mechanisms behind the construction of preference, especially the actual processes used by humans when they make decisions in their everyday lives or in business situations. The chapter uses cognitive psychological techniques to break down these processes and set them in their social context. When attributes are compatible with the response scale, they are assigned greater weight because they are most easily mapped onto the response. For instance, when subjects are asked to set a price (...) for a gamble this task is compatible with the information about the gamble payoff, which is also expressed in monetary values (e.g., dollars). Conversely, when the task requires a choice the payoff information is not easily mapped onto the response anymore and loses some of its salience. In fact, Slovic, Griffin, and Tversky (1990) could show that using non-monetary outcomes attenuates preference reversals when no compatibility between the pricing task and the outcome attribute was possible. An assumption of the compatibility effect is that response modes compatible with specific characteristics of the options (e.g., payoffs) draw attention to them. One of the main themes that has emerged from behavioral decision research during the past decades is the view that people's preferences are often constructed—not merely revealed—in the process of elicitation (see e.g. Slovic). This conception is derived in part from studies demonstrating that normatively equivalent methods of elicitation often give rise to systematically different responses. These "preference reversals" violate the principle of procedure invariance fundamental to theories of rational choice and raise difficult questions about the nature of human values. If different elicitation procedures produce different orderings of options, how can preferences be defined and in what sense do they exist? Describing and explaining such failures of invariance will require choice models of far greater complexity than the traditional models -/- . (shrink)

A violation of procedure invariance in preference measurement is that the predominant or prominent attribute looms larger in choice than in a matching task. In Experiment 1, this so-called prominence effect was demonstrated for choices between pairs of options, choices to accept single options, and preference ratings of single options. That is, in all these response modes the prominent attribute loomed larger than in matching. The results were replicated in Experiment 2, in which subjects chose between or rated their preference (...) for pairs of options which were matched to be equally attractive either in the same session or 1 week earlier. On the basis of these and previous results, it is argued that the prominence effect is a reliable phenomenon. However, none of several cognitive explanations which have been offered appears to be completely viable. (shrink)

One hundred and ninety participants (95 undergraduates and 95 employees) responded to a factorial survey in which a number of case-based organizational allocation tasks were described. Participants were asked to imagine themselves as employees in fictitious organizations and chose among three allocations of employee development schemes invested by the manager in different work groups. The allocations regarded how such investments should be allocated between two parties. Participants chose twice, once picking the fairest and once the best allocation. One between-subjects factor (...) varied whether the parties represented social (i.e., choosing among allocations between two different work groups) or temporal comparisons (i.e., choosing among allocations between the present and the following year). Another between-subjects factor varied whether participants’ in-group was represented by the parties or not. One allocation maximized the outcome to one party, another maximized the joint outcome received by both parties, and a third provided both parties with equal but lower outcomes. It was predicted that equality, although always deficient to both parties, would be the preferred allocation when parties represented social comparisons and when choices were based on fairness. When parties represented temporal comparisons, and when choices were based on preference, maximizing the joint outcome was hypothesized to be the preferred allocation. Results supported these hypotheses. Against what was predicted, whether the in-group was represented by the parties or not did not moderate the results, indicating that participants’ allocation preferences were not affected by self-interest. The main message is that people make sensible distinctions between what they prefer and what they regard as fair. The results were the same for participating students who imagined themselves as being employees and participants who were true employees, suggesting that no serious threats to external validity are committed when university students are used as participants. (shrink)

In the present study it was shown that decision heuristics and confidence judgements play important roles in the building of preferences. Based on a dual-process account of thinking, the study compared people who did well versus poorly on a series of decision heuristics and overconfidence judgement tasks. The two groups were found to differ with regard to their information search behaviour in introduced multiattribute choice tasks. High performers on the judgemental tasks were less influenced in their decision processes by numerical (...) information format (probabilities vs. frequencies) compared to low performers. They also looked at more attributes and spent more time on the multiattribute choice tasks. The results reveal that performance on decision heuristics and overconfidence tasks has a bearing both on heuristic and analytic processes in multiattribute decision making. (shrink)

An important problem for decision-makers in society deals with the efficient and equitable allocation of scarce resources to individuals and groups. The significance of this problem is rapidly growing since there is a rising demand for scarce resources all over the world. Such resource dilemmas belong to a conceptually broader class of situations known as social dilemmas. In this type of dilemma, individual choices that appear ‘‘rational’’ often result in suboptimal group outcomes. In this article we study how people make (...) monetary allocation decisions between the community where they live and a neighbouring community, with the aim of finding out to what extent these decisions are subject to biased over-weighting. The manuscript reports four experiments that deal with the way individuals make such allocation decisions when the potential beneficiaries are such communities. The specific goal of these experiments is to gauge the amount of bias in the weights that people assign to the various beneficiaries. Taken together, the results from all the four experiments suggest that making the gain of the neighbouring community prominent to a higher extent de-biases the outcomes (the prominence effect) compared to when own community gain is made prominent. Place identity is discussed as a potentially important factor in this connection. Hence, it may be argued that there seems to be some kind of a pro-self component that is able to explain a large part of the variance observed for the prominence effect. Connections between such a factor and in-group favouritism are discussed. A strength of the study was that these major results appeared to be quite robust when considered as task effects, as the salience of the manipulated context factors in the studies (in terms of reliable main or interaction effects) did not distort them. (shrink)

Whereas there is extensive documentation that attribute framing influences the content of peoples thought, we generally know less about how it affects the processes assumed to precede those thoughts. While existing explanations for attribute framing effects rely completely on valence-based associative processing, the results obtained in the present study are also consistent with the notion that negative framing stimulates more effortful and thorough information processing than positive framing. Specifically, results from a simulated business decision-making experiment showed that decision makers receiving (...) negatively framed information had significantly better recall than those receiving positively framed information. Furthermore, decision makers in the negative framing condition were less confident than decision makers in the positively framed condition. Finally, compared to a no-framing condition, decision makers receiving positive framing deviated significantly more in evaluation than decision makers receiving negative framing did. (shrink)

Two experiments with undergraduates as subjects tested explanations of how a prior temporary income change influences choices between buying and deferred buying. In Experiment 1 predictions from the behavioral life-cycle theory (Shefrin & Thaler, 1988), the renewable resources model (Linville & Fischer, 1991) and the loss-sensitivity principle (Garling & Romanus, 1997) were contrasted. The results are inconsistent with the latter two explanations since the framing of buying as positive (buying a new model of a product) or negative (replacing a broken (...) product) did not interact with the income change. Congruent with the behavioral life-cycle theory, willingness to buy was greater when subjects received a temporary income increase than when they received a temporary income decrease although total assets were equal. Further support for the behavioral life-cycle theory is obtained in Experiment 2 where four income-change conditions and durable and nondurable goods are compared. (shrink)

When a prominent attribute looms larger in one response procedure than in another, a violation of procedure invariance occurs. A hypothesis based on compatibility between the structure of the input information and the required output was tested as an explanation of this phenomenon. It was also compared with other existing hypotheses in the field. The study had two aims: (1) to illustrate the prominence effect in a selection of preference tasks (choice, acceptance decisions, and preference ratings); (2) to demonstrate the (...) processing differences in a matching procedure versus the selected preference tasks. Hence, verbal protocols were collected in both a matching task and in subsequent preference tasks. Silent control conditions were also employed. The structure compatibility hypothesis was confirmed in that a prominence effect obtained in the preference tasks was accompanied by a lower degree of attention to the attribute levels in these tasks. Furthermore, as predicted from the structure compatibility hypothesis, it was found that fewer comparisons between attribute levels were performed in the preference tasks than in the matching task. It was therefore concluded that both these processing differences may explain the occurrence of the prominence effects. (shrink)

The life-cycle theory of saving behavior (Modigliani, 1988) suggests that humans strive towards an equal intertemporal distribution of wealth. However, behavioral life-cycle theory (Shefrin & Thaler, 1988) proposes that people use self-control heuristics to postpone wealth until later in life. According to this theory, people use a system of cognitive budgeting known as mental accounting. In the present study it was found that mental accounts were used differently depending on if the income change was positive or negative. This was shown (...) both in a representative nationwide sample of households and in a student sample. Respondents were more willing to cut down on their propensity to consume when faced with an income decrease than to raise it when the income increased. Furthermore, contrary to the predictions of behavioral life-cycle theory, it was found that the respondents adjusted their propensity to consume the most when the income increases or decreases took place immediately. Hence, it is suggested that theories of intertemporal choice (e.g., Loewenstein, 1988; Loewenstein & Prelec, 1992) provide a better account of the data than does the behavioral lifecycle theory. (shrink)