Title: Decision Error and Contingent Reasoning
Lectuer: Professor Chew Soo Hong
Host：Hao Zhuang
Time：2020.10.29 16:00-18:00
Location：A618
Abstract:
A number of decision-making puzzles each points to some form of choice error which may be attributable to a failure in contingent reasoning. Besides the Allais’ (1953) common-consequence problem and Ellsberg’s (1961) three-color problem, we will discuss the Monty Hall problem, the failure of the Becker-DeGroot-Marschak mechanism as discussed in Cason-Plott (2014), and the acquiring-a-company problem (Samuelson-Bazerman, 1985) which relates to Akerlof’s (1970) lemons problem and the winner’s curse in common value auctions (Capen, Clapp, and Campbell, 1971; Charness and Levin, 2009). We offer a definition of contingent reasoning which relies on aggregating the contingency-induced choices arising from hypothetical knowledge. This helps shape the design of experiments by adopting a treatment which exposes the decision maker to hypothetical knowledge relating to the situation at hand before making the actual incentivized choices. Results from preliminary studies indicate that our hypothetical knowledge treatment is effective in enhancing the quality of decision making by reducing the incidence of failure in contingent reasoning ex ante. It appears that a hypothetical-knowledge based enhancement of decision making may be applicable to a wide range of settings especially where education and training are involved.
