Recorded Talks

A lecture delivered at the 33rd Advanced School in Economic Theory (June 26-July 5, 2023). Day 9 Session 2

Contradictory deviations from maximization, and the joint impact of experience and description. A lecture delivered at the 33rd Advanced School in Economic Theory (June 26-July 5, 2023). Day 9 Session 3

Watch now a talk given by Ido Erev: "Big data without big brothers: the potential of gentle rule enforcement" The talk was held at the 19th interdisciplinary Symposium on "Knowledge and Space" on May 5, 2022. The Symposium was organized by the Department of Geography (Heidelberg University, Germany) at the Studio Villa Bosch in Heidelberg. You can visit the webpage here: http://www.knowledgeandspace.uni-hd.de/ Ido Erev is Professor at the Faculty of Industrial Engineering and Management in the Technion at Israel Institute of Technology. You can visit his webpage here: https://web.iem.technion.ac.il/site/academicstaff/ido-erev/?hilite=%27erev%27

This is the third Economic Psychology Seminar organized by IAREP. Abstract: Mainstream decision research rests on two implicit working assumptions, inspired by subjective expected utility theory. The first assumes that the underlying processes can be separated into judgment and decision-making stages without affecting their outcomes. The second assumes that in properly run experiments, the presentation of a complete description of the incentive structure replaces the judgment stage (and eliminates the impact of past experiences that can only affect judgment). While these working assumptions seem reasonable and harmless, the current paper suggests that they impair the derivation of useful predictions. The negative effect of the separation assumption is clarified by the predicted impact of rare events. Studies that separate judgment from decision making document oversensitivity to rare events, but without the separation people exhibit the opposite bias. The negative effects of the assumed impact of description include masking the large and predictable effect of past experiences on the way people use descriptions. We propose that the cognitive processes that underlie decision making are more similar to machine learning classification algorithms than to a two-stage probability judgment and utility weighting process. Our analysis suggests that clear insights can be obtained even when the number of feasible classes is very large, and the effort to list the rules that best describe behavior in each class is of limited value. --- The Economic Psychology Seminars are promoted by IAREP and take place virtually once a month usually on a Monday on Zoom. The seminar organisers are Carlos Alós-Ferrer and Leonhard Lades. In the Economic Psychology Seminars, leading experts present their research on topics of interest to the economic psychology community. For further information about the Seminar Series: https://sites.google.com/view/economicpsychologyseminars/home For further information about IAREP: https://linktr.ee/iarep

The current effort to clarify the impact of experience on the phenomena captured by prospect theory highlights three main observations: 1. The impact is Large, replicable, and nontrivial. Experience does not insure more rational choices. It can reverse the deviations from rational choice. 2. Yet, the impact of experience can be predicted with the simple, and ecological reasonable, reliance on small samples hypothesis. 3. The small samples hypothesis implies very different cognitive processes than the processes suggested by prospect theory. Moreover, it leads to very different practical implications.