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This article proposes an Item Response Theoretical (IRT) forecasting model that incorporates proper scoring rules and provides evaluations of forecasters’ expertise in relation to the features of the specific questions they answer. We illustrate the model using geopolitical forecasts obtained by the Good Judgment Project (GJP) (see Mellers, Ungar, Baron, Ramos, Gurcay, Fincher, Scott, Moore, Atanasov, Swift, Murray, Stone & Tetlock, 2014). The expertise estimates from the IRT model, which take into account variation in the difficulty and discrimination power of the events, capture the underlying construct being measured and are highly correlated with the forecasters’ Brier scores. Furthermore, our expertise estimates based on the first three years of the GJP data are better predictors of both the forecasters’ fourth year Brier scores and their activity level than the overall Brier scores obtained and Merkle’s (2016) predictions, based on the same period. Lastly, we discuss the benefits of using event-characteristic information in forecasting.
Many decisions in everyday life involve a choice between exploring options that are currently unknown and exploiting options that are already known to be rewarding. Previous work has suggested that humans solve such “explore-exploit” dilemmas using a mixture of two strategies: directed exploration, in which information seeking drives exploration by choice, and random exploration, in which behavioral variability drives exploration by chance. One limitation of this previous work was that, like most studies on explore-exploit decision making, it focused exclusively on the domain of gains, where the goal was to maximize reward. In many real-world decisions, however, the goal is to minimize losses and it is well known from Prospect Theory that behavior can be quite different in this domain. In this study, we compared explore-exploit behavior of human subjects under conditions of gain and loss. We found that people use both directed and random exploration regardless of whether they are exploring to maximize gains or minimize losses and that there is quantitative agreement between the exploration parameters across domains. Our results also revealed an overall bias towards the more uncertain option in the domain of losses. While this bias towards uncertainty was qualitatively consistent with the predictions of Prospect Theory, quantitatively we found that the bias was better described by a Bayesian account, in which subjects had a prior that was optimistic for losses and pessimistic for gains. Taken together, our results suggest that explore-exploit decisions are driven by three independent processes: directed and random exploration, and a baseline uncertainty seeking that is driven by a prior.
This paper experimentally investigates a well-known anomaly in portfolio management, i.e., the fact that paper losses are realized less than paper gains (disposition effect). I confirm the existence of the disposition effect in a simple risky task in which choices are taken sequentially. However, when choices are planned ahead and a contingent plan is defined, a reversal in the disposition effect is observed.
Many people exhibit inconsistent preferences when they make choices based on descriptive summaries as compared to choices based on prior experiences. Theoretically, factors that promote more deliberative and skilled decision making (e.g., statistical numeracy) should also tend to promote more consistent choices and preferences regardless of information presentation formats. To test this hypothesis, in two studies I investigated individual differences in information search strategies (e.g., the amount and direction of information search) while estimating the degree to which numeracy predicted risky choice consistency across (a) decisions-from-description and (b) the decisions-from-samples. Results from Study 1 revealed that numeracy was generally associated with more extensive sampling and greater choice consistency across paradigms. Instead of reflecting differences in logical maximizing strategies (e.g., calculating expected values), analyses indicated that highly-numerate participants largely generated consistent choices by relying on heuristic-type processes (e.g., alternated between options less and exploring options with higher outcome variability more). In Study 2, the relationship between numeracy and choice consistency was eliminated when all participants were forced to make choices after experiencing the same fixed amount of sampling (i.e., provided the same amount of information). Taken together, the results of both studies converge with and extend previous findings (e.g., Skilled Decision Theory), indicating that numerate participants may generally exhibit more consistent preferences and choices via deliberatative heuristic search during decision making.
The present research investigated the reason for mixed evidence concerning the relationship between analytic cognitive style (ACS) and political orientation in previous research. Most past research operationalized ACS with the Cognitive Reflection Test (CRT), which has been criticized as relying heavily on numeracy skills, and operationalized political orientation with the single-item self-placement measure, which has been criticized as masking the distinction between social and economic conservatism. The present research recruited an Amazon Mechanical Turk sample and, for the first time, simultaneously employed three separate ACS measures (CRT, CRT2, Baserate conflict problems), a measure of attitudes toward self-critical and reflective thinking (the Actively Open-Minded Thinking Scale; AOT), and separate measures of social and economic conservatism, as well the standard measure of political orientation. As expected, the total ACS score (combination of the separate measures) was negatively related to social, but not economic, conservatism. However, the CRT by itself was not related to conservatism, in parallel with some past findings, while the two other measures of ACS showed the same pattern as the combined score. Trait reflectiveness (AOT) was related negatively to all measures of political conservatism (social, economic, and general). Results clearly suggest that the conclusion reached regarding the ACS-political orientation relationship depends on the measure(s) used, with the measure most commonly employed in past research (CRT) behaving differently than other measures. Future research must further pursue the implications of the known differences (e.g., reliance on numeracy vs. verbal skills) of ACS measures and distinguish different senses of reflectiveness.
The prominent dual process model of moral cognition suggests that reasoners intuitively detect that harming others is wrong (deontological System-1 morality) but have to engage in demanding deliberation to realize that harm can be acceptable depending on the consequences (utilitarian System-2 morality). But the nature of the interaction between the processes is not clear. To address this key issue we tested whether deontological reasoners also intuitively grasp the utilitarian dimensions of classic moral dilemmas. In three studies subjects solved moral dilemmas in which utilitarian and deontological considerations cued conflicting or non-conflicting decisions while performing a demanding concurrent load task. Results show that reasoners’ sensitivity to conflicting moral perspectives, as reflected in decreased decision confidence and increased experienced processing difficulty, was unaffected by cognitive load. We discuss how these findings argue for a hybrid dual process model interpretation in which System-1 cues both a deontological and utilitarian intuition.
In sport betting, bettors exhibit home bias when they tend to bet on their home team more often. The paper offers a straightforward method of empirical identification of the home bias in the real-world betting market. Using Czech betting data on the league and the national ice-hockey matches, the paper provides support for the existence of the home bias in the Czech betting market.
Voters prefer political candidates who are currently in office (incumbents) over new candidates (challengers). Using the premise of query theory (Johnson, Häubl & Keinan, 2007), we clarify the underlying cognitive mechanisms by asking whether memory retrieval sequences affect political decision making. Consistent with predictions, Experiment 1 (N= 256) replicated the incumbency advantage and showed that participants tended to first query information about the incumbent. Experiment 2 (N= 427) showed that experimentally manipulating participants’ query order altered the strength of the incumbency advantage. Experiment 3 (N= 713) replicated Experiment 1 and, in additional experimental conditions, showed that the effects of incumbency can be overridden by more valid cues, like the candidates’ ideology. Participants queried information about ideologically similar candidates earlier and also preferred these ideologically similar candidates. This is initial evidence for a cognitive, memory-retrieval process underling the incumbency advantage and political decision making.
The present paper examines the effectiveness of financial overcompensation as a means to enhance customer loyalty after a product failure. Overcompensation implies that customers are entitled to a refund that is larger than the purchase price. It is, however, still unclear whether large overcompensations entail saturation effects, or alternatively, result in an actual drop in customer loyalty. We predicted that the overcompensation-loyalty relationship is generally characterized by an inverted U-shaped function. In line with this prediction, the results of four studies showed that mild overcompensations had, on average, a positive effect on customer loyalty beyond equal compensation, but only up to compensation levels of approximately 150% of the purchase price of faulty products. Beyond this level, the effectiveness of overcompensation diminished, eventually leading to a general drop in customer loyalty. Despite this overall pattern, two studies revealed robust individual differences in how customers react to increasing overcompensation. A majority of customers increased their loyalty when the overcompensation enlarged, but the curve flattened out in the high range. However, there was also a smaller portion of customers who reacted negatively to every form of overcompensation. A practical implication of these findings, therefore, is that companies should not offer compensations that are greater than 150% of the initial price, as these do not contribute to greater loyalty in any category of customers.