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Fast or rational? A response-times study of bayesian updating


Achtziger, Anja; Alós-Ferrer, Carlos (2014). Fast or rational? A response-times study of bayesian updating. Management Science, 60(4):923-938.

Abstract

We present a simple model for decision making under uncertainty building on dual-process theories from psychology, and use it to illustrate a possible component of intuitive decision making of particular relevance for managerial settings. Decisions are the result of the interaction between two decision processes. The first one captures optimization based on Bayesian updating of beliefs. The second corresponds to a form of reinforcement learning capturing the tendency to rely on past performance. The model predicts that (i) in the case of conflict between the two processes, correct responses are associated with longer response times, but (ii) if both processes are aligned, errors are slower. Furthermore, (iii) response times in the case of conflict are longer than in the case of alignment. We confirm the predictions of the model in an experiment using a paradigm where an associative win-stay, lose-shift process conflicted with rational belief updating.

Abstract

We present a simple model for decision making under uncertainty building on dual-process theories from psychology, and use it to illustrate a possible component of intuitive decision making of particular relevance for managerial settings. Decisions are the result of the interaction between two decision processes. The first one captures optimization based on Bayesian updating of beliefs. The second corresponds to a form of reinforcement learning capturing the tendency to rely on past performance. The model predicts that (i) in the case of conflict between the two processes, correct responses are associated with longer response times, but (ii) if both processes are aligned, errors are slower. Furthermore, (iii) response times in the case of conflict are longer than in the case of alignment. We confirm the predictions of the model in an experiment using a paradigm where an associative win-stay, lose-shift process conflicted with rational belief updating.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Strategy and Management
Social Sciences & Humanities > Management Science and Operations Research
Uncontrolled Keywords:Management science and operations research, strategy and management
Language:English
Date:April 2014
Deposited On:08 Jan 2021 14:19
Last Modified:09 Jan 2021 21:01
Publisher:Institute for Operations Research and the Management Science
ISSN:0025-1909
OA Status:Closed
Publisher DOI:https://doi.org/10.1287/mnsc.2013.1793

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