How efficient are choice heuristics under varying degrees of uncertainty?

• Applicant: Professor Dr. Ralph Hertwig
• Subject Area: General, Cognitive and Mathematical Psychology
• Term: from 2011 to 2018
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 201270539

There are two classic answers to why people use heuristics. One is because people are cognitivelylimited; the other is to save effort at the cost of some accuracy. Both answers are basedon an assumed accuracy¿effort trade-off. There is, however, an entirely different rationale.Less effort can lead to less or more efficient decisions, depending on the environment in whicha heuristic is used. This research program on ecological rationality (Gigerenzer, Hertwig, &Pachur, 2011) has demonstrated that simple heuristics can enable surprisingly accurate inferences, especially when uncertainty is high (i.e., when key parameters of the decision have to be estimated based on limited information). To date, however, such ecological rationality analyses have, with few exceptions, been limited to the world of inference, in which externalbenchmarks of accuracy exist. Here, we extend the ecological approach to the world of preferential choice under uncertainty (ambiguity) and investigate the accuracy of heuristics in diverse environments that share one property: the options¿ properties (i.e., outcomes and probabilities) are not known with certainty, but the lack of knowledge can be successively reduced through learning. All choice strategies therefore make decisions from experience (rather than decisions from descriptions; Hertwig & Erev, 2009). Our goal is to identify under which environmental circumstances and degrees of uncertainty simple heuristics can, if at all, compete with the performance of complex (rational) choice strategies.

• DFG Programme: Priority Programmes
• Subproject of: SPP 1516: New Frameworks of Rationality
• Co-Investigator: Professor Dr. Thorsten Pachur