Choice

There’s never just one reinforcer

Hmm…what
to do?
Studying Choice Experimentally
• Hernstein VI 10 VI 30

“concurrent
schedules”
 The Matching Law
• RA = rate of response A
• rA = payoff rate for response A

RA rA
=
RA + RB rA + rB
Matching (R.J. Herrnstein)

responding
 Choice with uncertainty in real life

Kahneman & Tversky

Kahneman’s Nobel
Prize diploma
 Prospect Theory
20
15
10
v(x) [perceived value]
5
0

20

40

60

80
-80

-60

-40

-20

100
-100
-5
-10
-15
-20
-25
-30
-35
-40
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.
 Prospect Theory

Value
V(600)
V(200)
-600 -400

loss 200 600 gain

V(-400)
V(-600)
 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?
 Prospect Theory

Value
-$178 v. -$175

--$2 v. -$5
loss V(-2) v. V-5) gain

V(-175) v. V(-178)
 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?
 Prospect Theory

Value
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 Condition 2: Extensive selection

selection

% who choose chocolate as 48% 12%

compensation:
Satisfaction with sampled 6.28 5.46
chocolate (1-7 scale):
 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
Do you close it down?
Two failing hospitals
providing redundant
services and losing
money
Do you close one of
them down?

66% say “yes” Only 25% say “yes”!

 Avoidance of Choice
Tversky & Shafir (1992)

Control Condition Conflict Condition

$1.50 v. $1.50 v. v.
($2 value) ($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: • Satisficers
– Seek and accept only the best – Settle for good enough
– Strive to find the best possible – Set criteria and standards;
decisions choose first option that
– Attempts to examine all meets them.
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 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.