EFFECTS OF GROUPING INFORMATION ON DECISION MAKING UNDER RISK *

EFFECTS OF GROUPING INFORMATION ON DECISION MAKING UNDER RISK * The ability of decision makers to deal with information in terms of category labels rather than as precise data points is hypothesized as an explanation of how complex choices are made within the limits imposed by human information‐processing capacity. Twenty‐five decision makers placed bets under varying conditions of grouping of cues (probability of winning/losing, amount to be won, amount to be lost) as a test of this hypothesis. The results indicate that experimental pre‐grouping of cues has: (1) a statistically significant but practically unimportant impact on amounts bet; (2) no statistically significant effect on number of different bets made; and (3) no statistically significant effect on the fit of the bets to those predicted by an expected value model, except when grouping categories are very wide. These results support the contention that decision making occurs through the manipulation of category labels rather than exact values. Study of processes by which numerous exact cues are reduced to a smaller number of category labels is suggested as a complement to the study of sequential processing of alternatives, satisficing, the use of heuristics, and other means by which human beings make complex choices with limited cognitive capacity. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Decision Sciences Wiley

EFFECTS OF GROUPING INFORMATION ON DECISION MAKING UNDER RISK *

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Publisher
Wiley
Copyright
Copyright © 1980 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0011-7315
eISSN
1540-5915
DOI
10.1111/j.1540-5915.1980.tb01138.x
Publisher site
See Article on Publisher Site

Abstract

The ability of decision makers to deal with information in terms of category labels rather than as precise data points is hypothesized as an explanation of how complex choices are made within the limits imposed by human information‐processing capacity. Twenty‐five decision makers placed bets under varying conditions of grouping of cues (probability of winning/losing, amount to be won, amount to be lost) as a test of this hypothesis. The results indicate that experimental pre‐grouping of cues has: (1) a statistically significant but practically unimportant impact on amounts bet; (2) no statistically significant effect on number of different bets made; and (3) no statistically significant effect on the fit of the bets to those predicted by an expected value model, except when grouping categories are very wide. These results support the contention that decision making occurs through the manipulation of category labels rather than exact values. Study of processes by which numerous exact cues are reduced to a smaller number of category labels is suggested as a complement to the study of sequential processing of alternatives, satisficing, the use of heuristics, and other means by which human beings make complex choices with limited cognitive capacity.

Journal

Decision SciencesWiley

Published: Apr 1, 1980

References

  • Value: Behavioral Decision Theory
    Becker, Becker; McClintock, McClintock
  • Cognitive Styles in Categorizing Behavior
    Gardner, Gardner
  • The Measurement and Correlates of Category Width as a Cognitive Variable
    Pettigrew, Pettigrew
  • Sex Differences and Judgment Processes
    Wallach, Wallach; Kogan, Kogan

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