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One-reason decision making: Modeling violations of expected utility theory

One-reason decision making: Modeling violations of expected utility theory
One-reason decision making: Modeling violations of expected utility theory
People violate expected utility theory and this has been traditionally modeled by augmenting its weight-and-add framework by nonlinear transformations of values and probabilities. Yet individuals often use one-reason decision-making when making court decisions or choosing cellular phones, and institutions do the same when creating rules for traffic safety or fair play in sports. We analyze a model of one-reason decision-making, the priority heuristic, and show that it simultaneously implies common consequence effects, common ratio effects, reflection effects, and the fourfold pattern of risk attitude. The preferences represented by the priority heuristic satisfy some standard axioms. This work may provide the basis for a new look at bounded rationality.
0895-5646
35-56
Katsikopoulos, Konstantinos V.
b97c23d9-8b24-4225-8da4-be7ac2a14fba
Gigerenzer, Gerd
9678bb10-edd9-48cf-bfed-39d2aa8b7d76
Katsikopoulos, Konstantinos V.
b97c23d9-8b24-4225-8da4-be7ac2a14fba
Gigerenzer, Gerd
9678bb10-edd9-48cf-bfed-39d2aa8b7d76

Katsikopoulos, Konstantinos V. and Gigerenzer, Gerd (2008) One-reason decision making: Modeling violations of expected utility theory. Journal of Risk and Uncertainty, 37, 35-56. (doi:10.1007/s11166-008-9042-0).

Record type: Article

Abstract

People violate expected utility theory and this has been traditionally modeled by augmenting its weight-and-add framework by nonlinear transformations of values and probabilities. Yet individuals often use one-reason decision-making when making court decisions or choosing cellular phones, and institutions do the same when creating rules for traffic safety or fair play in sports. We analyze a model of one-reason decision-making, the priority heuristic, and show that it simultaneously implies common consequence effects, common ratio effects, reflection effects, and the fourfold pattern of risk attitude. The preferences represented by the priority heuristic satisfy some standard axioms. This work may provide the basis for a new look at bounded rationality.

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e-pub ahead of print date: 17 June 2008
Published date: August 2008

Identifiers

Local EPrints ID: 415447
URI: https://eprints.soton.ac.uk/id/eprint/415447
ISSN: 0895-5646
PURE UUID: 789ce03a-ccce-4b9b-9ff0-a9462f1f191c

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Date deposited: 10 Nov 2017 17:30
Last modified: 18 Jul 2019 11:26

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