Choice
There’s never just one reinforcer
Hmm…what
to do?
Studying Choice Experimentally
• Hernstein
“concurrent
schedules”
VI 10
VI 30
The Matching Law
• RA = rate of response A
• rA = payoff rate for response A
RA
RA + RB
rA
=
rA + r B
responding
Matching (R.J. Herrnstein)
Choice with uncertainty in real life
Kahneman & Tversky
Kahneman’s Nobel
Prize diploma
100
80
60
40
20
0
-20
-40
-60
-80
20
15
10
5
0
-5
-10
-15
-20
-25
-30
-35
-40
-100
v(x) [perceived value]
Prospect Theory
x [actual value]
"We have an irrational tendency to be less willing to gamble
with profits than with losses."
Kahneman & Tversky (1981)
Prospect Theory
"We have an irrational tendency to be less willing to gamble
with profits than with losses."
Kahneman & Tversky (1981)
Two programs to combat disease:
• If program A is adopted, 200 people will be
saved.
• If program B is adopted, there is a 1/3
probability that 600 people will be saved,
and 2/3 probability that no one will be
saved.
Two programs to combat disease:
• If program C is adopted, 400 people will be
die.
• If program D is adopted, there is a 1/3
probability that nobody will die, and 2/3
probability that 600 people will die.
Value
Prospect Theory
V(600)
V(200)
-600
loss
-400
200
V(-400)
V(-600)
600
gain
A purchasing decision
• A box of cereal costs $5 at the local grocery
store, but only $2 at the grocery store across
town.
Would you go to the grocery store across
town?
A purchasing decision
• A television costs $178 at the local
electronics store, but only $175 at the
electronics store across town.
Would you go to the electronics store across
town?
loss
--$2 v. -$5
-$178 v. -$175
Value
Prospect Theory
V(-2) v. V-5)
V(-175) v. V(-178)
gain
You’re the CEO of a credit card
company
The customer must bear some of the costs
associated with the processing of credit card
purchases. How would you want the price
difference to be framed?
– A cash discount?
– A credit card surcharge?
Value
Prospect Theory
loss
gain
The loss side of the curve is steeper than the gain side.
The pain of losses is stronger than the pleasure of gains.
Endowment Effect
Kahneman, Knetsch & Thaler (1990)
Pilot studies showed the pen and mug to be equally
preferred (50% of people prefer pen, 50% prefer mug)
But when subjects actually given one item, and then
given the opportunity to trade, only 10% traded
Major features of prospect theory
(summary)
• Reference level dependence: An individual views
consequences (monetary or other) in terms of changes
from the reference level, which is usually that individual's
status quo.
• Gain and loss satiation: The values of the outcomes for
both positive and negative consequences of the choice
have the diminishing returns characteristic.
• Loss aversion: The resulting value function is steeper for
losses than for gains; losing $100 produces more pain than
gaining $100 produces pleasure.
The consequences of choice
Having choices is a good thing, right?
More choices =
Better chance of
finding what you
want
Ultimately more
satisfaction with
what you chose
More freedom
The consequences of choice
More choices =
More options to evaluate
(more time and effort)
More options to ultimately
turn down
More options to possibly
regret turning down
(opportunity costs)
Consequences of choice
Iyengar & Lepper (2000): Subjects choose one chocolate to
sample
Condition 1: Limited
selection
Condition 2: Extensive selection
% who choose chocolate as
compensation:
48%
12%
Satisfaction with sampled
chocolate (1-7 scale):
6.28
5.46
Deferral of Choice
Redelmeier & Shafir (1995)
Legislators in the Ontario Provincial Parliament
presented with the following scenarios:
Scenario #1:
Scenario #2:
There’s a failing
hospital providing
redundant services and
losing money
Two failing hospitals
providing redundant
services and losing
money
Do you close it down?
Do you close one of
them down?
66% say “yes”
Only 25% say “yes”!
Avoidance of Choice
Tversky & Shafir (1992)
Control Condition
$1.50 v.
Conflict Condition
$1.50 v.
($2 value)
v.
($2 value)
($2 value)
75% of S’s choose pen
47% of S’s choose a pen
(53% choose money)!
What to do? Be a satisficer.
• Maximizers:
– Seek and accept only the best
– Strive to find the best possible
decisions
– Attempts to examine all
alternatives before choosing
– Often their decisions to the
decisions of others
– Feel less positive about
their purchasing
decisions
– Savor positive events less
– Do not cope as well with
negative events
– Tend to brood and
ruminate more
• Satisficers
– Settle for good enough
– Set criteria and standards;
choose first option that
meets them.
Schwartz et al (2002)
Are you a maximizer?
From Schwartz et al (2002)
1. Whenever I’m faced with a choice, I try to
imagine what all the other possibilities are, even
ones that aren’t present at the moment
2. No matter how satisfied I am with my job, it’s
only right for me to be on the lookout for better
opportunities
3. I find that writing is very difficult, even if it’s
just writing a letter to a friend, because it’s so
hard to work things just right. I often do several
drafts of even the simplest things.
4. I often fantasize about living in ways that are
quite different from my actual life.