California Institute of Technology
Pasadena CA 91125
Cambridge MA 02138
I present a potential third instrumental system for value-based decision making that is premised upon similarity between past and present episodes. It can be mathematically described by the economic model of case-based decision theory accompanied by the computational background of case-based reasoning. This case-based system stands between model-free and model-based valuation systems in its position on the bias-variance tradeoff and holds advantages over both when faced with novel and complex problems. The hippocampus and related medial temporal lobe structures provide the neural substrate upon which case-based calculations are thought to be performed in the process of forming connections and associations between stimuli over long timescales. This neuroscientific understanding sheds light on how such calculations can also contribute to model-free and model-based decisions.
Taking longer than expected to complete a task can cause disappointment if the expectation constitutes a reference point. In a real-effort lab experiment, I show that a worker's willingness to persevere in a task is influenced by information about task completion time. To directly assess the location and impact of reference dependence, I structurally estimate labor-leisure preferences with a novel econometric approach drawing on cognitive science. Once participants exceed an expectations-based reference point, their subjective values of time rise sharply. Workers who fall behind the reference point are demoralized as measured by ratings of task satisfaction.
When choosing among alternatives, we must also choose how much time to spend evaluating them. Popular theoretical models assert that this deliberation optimally balances the costs of time expenditure and benefits of better decisions. I propose and implement a method to test the optimality of individual deliberation. The method consists of checking a condition necessary for optimality, which is consistency of underlying preferences for time versus reward when incentives changes. I measure choices and response times of human participants in motion-discrimination tasks, and find significant departures from optimality when task difficulty and monetary incentives are varied. I also assess a further implication of optimality which applies when the ease of decision making reflects the difference in value between options: as the amount of time already spent deliberating on a problem grows, the standard of confidence required to make a decision should fall. I conduct the first test of new theoretical results by Fudenberg et al. (2015) that characterize the decision rule in this setting. Model fits indicate that participants are sensitive to the information that elapsed time provides about the value of continued deliberation, especially once they have experience with the task. Thus principles of optimality help capture certain facets of deliberative behavior.
The order in which options are presented is known to affect choice in ways that parallel primacy and recency effects in memory. I present sequences of art to experimental participants who select their favorite pieces. Analogous to past findings in memory research, I show that cognitive load can selectively weaken choice primacy or recency depending on its timing. Primacy is reduced by an externally-imposed distractor task in between each option or by natural fatigue, while recency is reduced by an extra delay containing a distractor after the last option is presented. Thus effective interventions to reduce choice biases can be built upon the disruption of memory encoding and consolidation. However, the distractors do not affect recognition memory for stimuli in the same way as choice, suggesting that value processing and feature processing may interact negatively or competitively.
Business Analytics (Caltech BEM/Ec 150, SP 2015)
Business Analytics (Caltech BEM/Ec 150, SP 2014)
Selected Topics in Economics: Business Analytics (Caltech Ec 101, WI 2012)
Student Directed Seminar: Behavioural Economics (UBC ECON 492B, 2008W Term 2)