Shawn P. Curley

Psychological sources of ambiguity avoidance

Ambiguity is characterized as uncertainty about the probabilities with which outcomes can occur. Previous research has established that subjects, when given a choice between two options differing in their degree of ambiguity, tend to prefer the less ambiguous option, exhibiting ambiguity avoidance. The present paper addresses the psychological sources of this behavior. Five plausible hypotheses for the basis of ambiguity avoidance were extracted from the literature, along with a sixth proposal which questioned the deliberateness of the behavior. None of the hypotheses had previously been sufficiently examined empirically. In a series of five experiments, each of the proposed explanations of ambiguity avoidance was tested. Of the six, only one, termed “other-evaluation,” had an effect on subjects’ choice behavior in an ambiguous situation involving monetary lotteries. The other-evaluation hypothesis states that a decision maker, in making a choice, anticipates that others will evaluate his or her decision; and, so, makes the choice that is perceived to be most justifiable to others. This choice is for the option having the smallest degree of ambiguity. It is concluded that the other-evaluation hypothesis offers the most promising direction for future research regarding the psychology of choice under ambiguity. 0 1986 Academic press, Inc.

The center and range of the probability interval as factors affecting ambiguity preferences

Abstract Ambiguous decision situations are characterized as having probabilities that are uncertain. The uncertainty is due to the common, real-world deficiency of information about the process by which the outcomes are determined. Thirty lotteries having uncertain probabilities were constructed by varying the centers and the ranges of the intervals within which the imprecise probabilities of winning could lie. Pairs of the lotteries were presented as choice alternatives to subjects, with each pair having lotteries with the same interval center but differing interval ranges. Ambiguity avoidance, the selection of the less ambiguous option, was found to increase with the interval center C , with ambiguity indifference occurring for values of C ⩽ 0.40. No evidence of ambiguity seeking as the prevalent behavior was obtained. Ambiguity avoidance did not significantly increase with the interval range R , but an interaction effect between C and the ranges R 1 and R 2 of the choice pair was obtained. This effect of the ranges could not be described simply by knowledge of the difference R 1 − R 2 ; knowledge of both individual values was necessary. The theoretical implications of these results are discussed.

An empirical evaluation of descriptive models of ambiguity reactions in choice situations

Ambiguity is uncertainty about an option’s outcome-generating process, and is characterized as uncertainty about an option’s outcome probabilities. Subjects, in choice tasks, typically have avoided ambiguous options. Descriptive models are identified and tested in two studies which had subjects rank monetary lotteries according to preference. In Study 1, lotteries involved receiving a positive amount or nothing, where P denotes the probability of receiving the nonzero amount. Subjects were willing to forego expected winnings to avoid ambiguity near P = SO and P = .75. Near P = .25, a significant percentage of subjects exhibited ambiguity seeking, with subjects, on average, willing to forego expected winnings to have the more ambiguous option. The observed behavior contradicts the viability of a proposed lexicographic model. Study 2 tested four polynomial models using diagnostic properties in the context of conjoint measurement theory. The results supported a sign dependence of ambiguity with respect to the probability level P, such that subjects’ preference orderings over ambiguity reversed with changes in P. This behavior was inconsistent with all the three-factor polynomial models investigated. Further analyses failed to support a variant of portfolio theory, as well. The implications of these results for the descriptive modeling of choice under ambiguity are discussed. 0 1989 Academic Press, Inc. Suppose you feel stiffness and pain in your legs after walking several blocks. At the clinic, you are informed of two available treatments, Treatment A and Treatment B. You describe your choice, as to which treatment to accept, if either, by the tree structure shown in Fig. 1. The structure captures your beliefs that the possible outcomes at least partly depend upon your choice, and that the outcomes are uncertain. These features are components of most decision models under uncertainty that have been proposed. Your next step could be to use probabilities, indicated on the tree in Fig. 1, as subjective measures of your uncertainty about the chances that each treatment will be successful. A decision analysis would proceed in this fashion (Weinstein

CONTINGENCY JUDGMENT: PRIMACY EFFECTS AND ATTENTION DECREMENT *

Subjects made judgments concerning the strength and direction of the contingency between two dichotomous variables in a situation in which no contingency actually existed. The judgments exhibited a significant primacy effect. The effects of warning and not warning the subjects that they would be required to recall the frequencies of observed event co-occurrences implied that this primacy effect was due to ‘attention decrement’ (Anderson 1981). According to this hypothesis, attention to contingency-relevant information diminishes after the subject is exposed to only a small portion of the available information.

Belief, knowledge, and uncertainty: A cognitive perspective on subjective probability

Abstract This paper presents a cognitive analysis of subjective probability judgments and proposes that these are assessments of belief-processing activities. The analysis is motivated by an investigation of the concepts of belief, knowledge, and uncertainty. Judgment and reasoning are differentiated, Toulmins (1958) theory of argument being used to explicate the latter. The paper discusses a belief-processing model in which reasoning is used to translate data into conclusions, while judgmental processes qualify those conclusions with degrees of belief. The model sheds light on traditional interpretations of probability and suggests that different characteristics of belief—likelihood and support—are addressed by different representational systems. In concluding, the paper identifies new lines of research implied by its analysis.

An Investigation of Patient's Reactions to Therapeutic Uncertainty:

questionnaire distributed to 306 outpatients and spouses at two hospital locations. It was found that 21.0 percent of the subjects would avoid an ambiguous treatment with the same success probability level at which they previously accepted a nonambiguous treatment; 33.7 percent of the subjects preferred to defer the treatment decision to the physician altogether. Confidence and the context of the decision were related to ambiguity avoidance, and decision avoidance was related to age. The implications of these findings for medical decision making are discussed in relation

Effect of Information Feedback on Bidder Behavior in Continuous Combinatorial Auctions

Combinatorial auctions---in which bidders can bid on combinations of goods---can increase the economic efficiency of a trade when goods have complementarities. Recent theoretical developments have lessened the computational complexity of these auctions, but the issue of cognitive complexity remains an unexplored barrier for the online marketplace. This study uses a data-driven approach to explore how bidders react to the complexity in such auctions using three experimental feedback treatments. Using cluster analyses of the bids and the clicks generated by bidders, we find three stable bidder strategies across the three treatments. Further, these strategies are robust for separate experiments using a different setup. We also benchmark the continuous auctions against an iterative form of combinatorial auction---the combinatorial clock auction. The enumeration of the bidding strategies across different types of feedback, along with the analysis of their economic implications, is offered to help practitioners design better combinatorial auction environments. This paper was accepted by Lorin Hitt, information systems.

Primacy Effects in Clinical Judgments of Contingency

In contingency judgment a primacy effect exists when a conclusion about the relationship between clinical variables is inordinately influenced by cases seen earlier rather than later in a presentation sequence. In this study, medical and nursing trainees evidenced this behavior in a hypothetical clinical judgment situation. The behavior was tied to an attention decrement explanation, by which inattention to the later-presented cases leads to inaccurate recall of the relative frequencies of observed cases, which in turn induces a misjudgment of a disease-finding contingency. An explicit intervention based on this hypothesis, forcing attention to later cases by warning that recall of the case frequencies would be required, was effective in reducing primacy effects among medical students. A related, but less explicit, intervention was also tried. This intervention did not significantly reduce primacy effects among nursing students, but was somewhat effective among general undergraduate students performing a non-clinical contingency judgment task. Key words: clinical judgment; diagnosis; decision making. (Med Decis Making 8:216-222, 1988)

Impact of information feedback in continuous combinatorial auctions: an experimental study of economic performance

Advancements in information technology offer opportunities for designing and deploying innovative market mechanisms that can improve the allocation and procurement processes of businesses. For example, combinatorial auctions--in which bidders can bid on combinations of goods--have been shown to increase the economic efficiency of a trade when goods have complementarities. However, the lack of real-time decision support tools for bidders has prevented this mechanism from reaching its full potential. With the objective of facilitating bidder participation in combinatorial auctions, this study, using recent research in real-time bidder support metrics, discusses several novel feedback schemes that can aid bidders in formulating combinatorial bids in real-time. The feedback schemes allow us to conduct continuous combinatorial auctions, where bidders can submit bids at any time. Using laboratory experiments with two different setups, we compare the economic performance of the continuous mechanism under three progressively advanced levels of feedback. Our findings indicate that information feedback plays a major role in influencing the economic outcomes of combinatorial auctions. We compare several important bid characteristics to explain the observed differences in aggregate measures. This study advances the ongoing research on combinatorial auctions by developing continuous auctions that differentiate themselves from earlier combinatorial auction mechanisms by facilitating free-flowing participation of bidders and providing exact prices of bundles on demand in real time. For practitioners, the study provides insights on how the nature of feedback can influence the economic outcomes of a complex trading mechanism.

Seeking and Applying Diagnostic Information in a Health Care Setting.

Many studies have shown that people have difficulty judging the diagnostic value of conditional probability information with respect to one or more hypotheses. The present research addressed two aspects of performing the diagnostic task in a health care decision: (a) recognition of the informations importance, and (b) correct usage of that information. In experiment 1, health care providers, who are trained in, and regularly exposed, to conditional probabilities imparting diagnostic information, exhibited at least a rudimentary recognition of the need for this information in assessing diagnosticity. Experiment 2 indicated that health care and layperson subjects had difficulty in actually applying the information, however. This difficulty prompts a need for judgment aids and caution in using diagnostic information.