This book provides an overview of behavioral decision theory and related research findings. In brief, behavioral decision theory is a general term for descriptive theories to explain the psychological knowledge related to decision-making behavior. It is called a theory, but actually it is a combination of various psychological theories, for which no axiomatic systems, such as the utility theory widely used in economics, have been established; it is often limited to qualitative knowledge. However, as suggested in the studies of (...) H. A. Simon, who won the Nobel Prize for Economics in 1978, and D. Kahneman, who won the prize in 2002, the psychological methodology and knowledge of behavioral decision theory have been applied widely in such fields as economics, business administration, and engineering, and are expected to become more useful in the future. This book explains various behavioral decision theories related to decision-making processes. Numerous models have been proposed to explain the psychological processes related to such a selection of decision strategies, and this book also introduces some new models that are useful to explain decision-making processes. The book concludes with speculation about the future of modern behavioral decision theories while referring to their relation to fields associated with neuroscience, such as neuroeconomics, that have been developed in recent years. In addition, each chapter includes a bibliography that can be referred to when studying more details related to behavioral decision theory. Reading this book requires no advanced expertise; nonetheless, an introductory knowledge of psychology, business administration, and economics, and approximately a high school graduate’s level of mathematics should facilitate the reader’s comprehension of the content. (shrink)

I argue that (1) the accusation that psychological methods are too diverse conflates “reliability” with “validity”; (2) one must not choose methods by the results they produce – what matters is whether a method acceptably models the real-world situation one is trying to understand; (3) one must also distinguish methodological failings from differences that arise from the pursuit of different theoretical questions.

This paper shows how alternative, culturally-determined motivational forces can be substituted for self-interest or rationality in the theory of choice. Several possibilities are considered, including the replacement of preference optimization by such propellants as the selection of the `second best' or the `central' option. It is argued that although all choice behavior, even that consistent with the alternatives considered, can ultimately be understood as satisfying the criterion of rationality, richer and more meaningful explanation is obtained by focusing (...) on culturally significant alternative motivations when the latter turn out, in particular environments, to be more important than self-interest. (shrink)

This research examined choice behaviour and probability judgement in a counterintuitive reasoning problem called the Monty Hall problem (MHP). In Experiments 1 and 2 we examined whether learning from a simulated card game similar to the MHP affected how people solved the MHP. Results indicated that the experience with the card game affected participants' choice behaviour, in that participants selected to switch in the MHP. However, it did not affect their understanding of the objective probabilities. This suggests that (...) there is dissociation between implicit knowledge gained from the task and the explicit understanding as to why switching was the best strategy. In Experiment 3, the number of prizes and doors were manipulated to examine how participants construed the problem space of the MHP. Results revealed that participants partition the probability judgement to reflect the number of prizes over the number of unopened doors. (shrink)

Decision-makers frequently struggle to base their choices on an exhaustive evaluation of all options at stake. This is particularly so when the choice problem at hand is complex, because the available alternatives are hard to compare. Rather than striving to choose the most valuable alternative, in such situations decision-makers often settle for the choice of an alternative which is not inferior to any other available alternative instead. In this paper, we extend two established models of boundedly rational (...) class='Hi'>choice, the categorize then choose heuristic and the rational shortlist method, to incorporate this kind of “indecisive” choice behavior. We study some properties of these extensions and provide full behavioral characterizations. (shrink)

In our daily lives, we continuously evaluate feedback information, update our knowledge, and adapt our behavior in order to reach desired goals. This ability to learn from feedback information, however, declines with age. Previous research has indicated that certain higher-level learning processes, such as feedback evaluation, integration of feedback information, and updating of knowledge, seem to be affected by age, and recent studies have shown how the adaption of choice behavior following feedback can differ with age. The (...) neural mechanisms underlying this age-related change in choice behavior during learning, however, remain unclear. The aim of this study is therefore to investigate the relation between learning-related neural processes and choice behavior during feedback learning in two age groups. Behavioral and fMRI data were collected, while a group of young and older adults performed a probabilistic learning task consisting of 10 blocks of 20 trials each. On each trial, the participants chose between a house and a face, after which they received visual feedback. In each block, either the house or the face image had a higher probability of yielding a reward. Participants were instructed to try to maximize their gains. Our results showed that less successful learning in older adults, as indicated by a lower learning rate, corresponded with a higher tendency to switch to the other stimulus option, and with a reduced adaptation of this switch choice behavior following positive feedback. At the neural level, activation following positive and negative feedback was found to be less distinctive in the older adults, due to a smaller feedback-evaluation response to positive feedback in this group. Furthermore, whereas young adults displayed increased levels of knowledge updating prior to adapting choice behavior, we did not find this effect in older adults. Together, our results suggest that diminished learning performance with age corresponds with diminished evaluation of positive feedback and reduced knowledge updating related to changes in choice behavior, indicating how such differences in feedback processing at the trial level in older adults might lead to reduced learning performance across trials. (shrink)

Game-theoretic explanations of behavior need supplementation to be descriptive; behavior has multiple causes, only some governed by traditional rationality. An evolutionarily informed theory of action countenances overlapping causal domains: neurobiological, psychological, and rational. Colman's discussion is insufficient because he neither evaluates learning models nor qualifies under what conditions his propositions hold. Still, inability to incorporate emotions in axiomatic models highlights the need for a comprehensive theory of functional rationality.

In the presence of incomplete risk attitudes, choices between noncomparable risky prospects are random. A random choice model advanced by Karni, 2021) includes the hypothesis that choices among noncomparable risky prospects are prompted by signals drawn from personal distributions. This paper introduces a scheme designed to elicit subjects’ assessments of their personal likelihoods of choices among noncomparable risky prospects and describes experiments designed to test the aforementioned hypothesis.

Choosing the smaller, less delayed reinforcers of drug abuse (including cessation of withdrawal) over the larger, more delayed reinforcers of a healthy life can be described as impulsiveness (the opposite of self-control). Examination of drug abuse using a self-control/impulsiveness framework can help explain many of the puzzles about this behavior, while tying drug abuse into a large research database.

Critics have argued that behaviorism must necessarily be inadequate to account for complex human behavior whereas cognitive psychology is adequate to account for such behavior. Recently, Fodor has focused this criticism on certain situations in which humans choose among a set of alternatives. We argue that this criticism applies to forms of behaviorism that are reductionistic but not to non-reductionistic behaviorisms like that of Skinner. Non-reductionistic behaviorism can be used to interpret human choice situations of varying degrees (...) of complexity. Such interpretations run into difficulty in accounting for certain aspects of verbal behavior, but so do cognitive theories. Although nothing, in principle, prohibits either type of theory from accounting for complex human behavior, neither current behavioral theory nor current cognitive theory is developed enough at the present time to do so. (shrink)

Recently several authors have proposed proxies of welfare that equate some (as opposed to all) choices with welfare. In this paper, I first distinguish between two prominent proxies: one based oncontext-independent choicesand the other based onreason-based choices. I then propose an original proxy based on choices that individuals state they would want themselves to repeat at the time of the welfare/policy evaluation (confirmed choices). I articulate three complementary arguments that, I claim, support confirmed choices as a more reliable proxy of (...) welfare than context-independent and reason-based choices. Finally, I discuss the implications of these arguments fornudgesandboosts. (shrink)

This book details the results of the authors' research using laboratory animals to investigate individual choice theory in economics-consumer-demand and labour supply behaviour and choice under uncertainty. The use of laboratory animals provides the opportunity to conduct controlled experiments involving precise and demanding tests of economic theory with rewards and punishments of real consequence. Economic models are compared to psychological and biological choice models along with the results of experiments testing between these competing explanations. Results of animal (...) experiments are used to address questions of social policy importance. (shrink)

While Rational Choice Theory (RC) may be understood as a theory of choice, which does not necessarily reflect actual deliberative processes, rule-following behavior is definitely based on a certain form of delibera- tion. This article aims at clarifying the relationship between the two. Being guided by instrumental rules, i.e., rules reducible to the maximiza- tion principle, is perfectly consistent with the fundamental behavioral assumptions of RC. But human individuals use other forms of rules in decision making, especially (...) tie-breaking rules and coordination rules. It is argued that within RC no satisfying account of such rule-following behav- ior can be given. In particular it is impossible to determine suitable pref- erence orderings such that coordinating may be understood as maximizing relative to these orderings. Still, once there is coordination, following a coordination rule may be perfectly consistent with the basic assumptions of RC. So there might be a more complex theory of action that incorpo- rates RC as well as a satisfying theory of rule-guided behavior. (shrink)

Abstract:Analysis of ethical conduct of business organizations has hitherto placed primary emphasis on the conduct of that corporation’s managers because ethical conduct, like all conduct, must manifest itself through individual behavior. This paper argues that in the real world corporate actions are influenced, to a considerable extent, by external market-based conditions. Therefore, a more comprehensive explanation of ethical business conduct must incorporate both corporate, i.e., internal considerations, and competitive, industry structure-based, i.e., external considerations. A framework is presented that provides (...) a systematic analysis of the interactive effect between different types of external market-based competitive conditions, institutional opportunities to engage in ethical behavior, and the likelihood that corporations would do so. The analytical framework leads to recommendations as to the types of actions that might be more effective in improving business ethical conduct under varying sets of market-based competitive conditions. (shrink)