Veronika Zilker
Postdoctoral Researcher
Behavioral Research Methods, TUM School of Management, Technical University of Munich
Friday, October 21, 2:00–3:30
This talk is via Zoom. Please contact Michael DeKay at dekay.3@osu for the link.
Title: Normative Implications of Attentional Biases in Decision Making
Abstract: When making decisions under risk, people often systematically deviate from maximizing expected utility. Nonlinear probability weighting allows cumulative prospect theory (CPT) to account for key violations of utility maximization in decision making under risk (e.g., certainty effect, fourfold pattern of risk attitudes). It describes the impact of risky outcomes on preferences in terms of a rank-dependent nonlinear transformation of their objective probabilities. However, it is unclear how specific shapes of the probability weighting function come about on the level of cognitive processing. In the first part of this talk I will show that distortions in probability weighting can arise from simple option-specific attentional biases in information search. This is demonstrated based on simulations using the attentional Drift Diffusion Model (aDDM) and in analyses of empirical data. Further evidence indicates that these effects of attention allocation on probability weighting are causal. These results point to novel, attention-based explanations for common violations of economic rationality (e.g., fourfold pattern), and to possible interventions to alleviate such biases. In the second part of the talk I investigate the implications of attentional biases from a second normative perspective, namely, reward rate maximization. Both simulations and empirical analyses reveal that, while stronger attentional biases may be linked to systematic violations of EV/EU maximization, they can be surprisingly beneficial to decision makers when one takes into account the time cost of choice.