Preference construction for multiple choice options with the simple choice tree model

Lena Wollschläger, Jacobs University, AG Prof. Dr. Adele Diederich

 

Abstract

When choosing between multiple alternatives, people usually do not have ready-made preferences in their mind but rather construct them on the go. The resulting preferences are stochastic and highly dependent on the context, i.e., on the alternatives in the choice set and on any external reference points. Three context effects have particularly challenged traditional models of preferential choice: Similarity, attraction, and compromise effects. The simple choice tree model is able to produce these effects by means of a preference construction process and additionally accounts for the positive correlation between the attraction and compromise effects and the negative correlation between these two and the similarity effect. The preference construction process is based on attribute weights, differences between attribute values, and noise. A so-called focus value determines whether decisions are based on eliminations of unwanted alternatives or on direct choice of preferred options.


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Cognitive Science Lab

 

 

 

Coping with uncertainty: insights how small groups make decision on financial markets

Lydia Welbers, Universität Bremen, AG Prof. Dr. Uwe Schimank

 

Abstract

The lecture focuses on decision making processes in investment clubs, groups of retail investors who decide together where to invest their common money. These kinds of decisions are made under conditions of fundamental uncertainty, because financial markets trade expectations about future outcomes which goes along with uncertainty and complexity. Every investor has to deal with it, but making a decision in a small group influences the decision making in specific ways. How the decision is influenced by the group level is subject of this lecture and I refer to my ethnography of investment clubs in Germany. The influence can be differentiated in three dimensions; the informational, social and time dimension. In the time dimension, investment clubs are bound to a restricted time budget which frames decisions. Besides that they are compelled to make a decision at some points. On the informational dimension investment clubs offers on the one hand the opportunity to incorporate heterogeneous information in the process. Looking at the conversational level on the other hand, it attracts attention that most times reluctant information aren’t yielded in the process of decision making. I will argue, that this orientation to reach a common understanding of the situation in the social dimension has different, and sometimes irritating impacts on the group. Group Think can be a result of it. That maybe lowers the “quality” of the decision, but heightens the cohesion of the group. At the end of my presentation I will discuss what implications studying decision making in investment clubs has for our understanding of decision making under conditions of uncertainty and concepts of rationality.

 

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Socium