One-Reason Decision-Making: Modeling Violations of Expected Utility Theory

Konstantinos V. Katsikopoulos and Gerd Gigerenzer

in Heuristics

Published in print April 2011 | ISBN: 9780199744282
Published online May 2011 | e-ISBN: 9780199894727 | DOI:
One-Reason Decision-Making: Modeling Violations of Expected Utility Theory

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People violate expected utility theory and this has been traditionally modeled by augmenting its weight-and-add framework by nonlinear transformations of values and probabilities. Yet individuals often use one-reason decision-making when making court decisions or choosing cellular phones, and institutions do the same when creating rules for traffic safety or fair play in sports. This chapter analyzes a model of one-reason decision-making, the priority heuristic, and show that it simultaneously implies common consequence effects, common ratio effects, reflection effects, and the fourfold pattern of risk attitude. The preferences represented by the priority heuristic satisfy some standard axioms. This work may provide the basis for a new look at bounded rationality.

Keywords: decision making; EVT/EUT; St. Petersburg Paradox; heuristics; priority

Chapter.  10781 words. 

Subjects: Cognitive Psychology

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