Posts in Category: English

post or publication in English

Paper: Foraging for alternative options

Should I stay or should I go now?
If I go there will be trouble,
and if I stay it will be double…
The Clash


Hansjörg Neth, Neele Engelmann, Ralf Mayrhofer

Foraging for alternatives: Ecological rationality in keeping options viable

Abstract:  Do we invest irrational amounts of effort into keeping options viable, or do we manage available and threatened options in an adaptive fashion? 

Paper: Heuristics for financial regulation

It simply wasn’t true that a world with almost perfect information
was very similar to one in which there was perfect information.
J. E. Stiglitz (2010). Freefall: America, free markets,
and the sinking of the world economy, p. 243

 

 


Hansjörg Neth, Björn Meder, Amit Kothiyal, Gerd Gigerenzer

Homo heuristicus in the financial world: From risk management to managing uncertainty

Abstract: What — if anything — can psychology and decision science contribute to risk management in financial institutions? The turmoils of recent economic crises undermine the assumptions of classical economic models and threaten to dethrone Homo oeconomicus, who aims to make decisions by weighing and integrating all available information. But rather than proposing to replace the rational actor model with some notion of biased, fundamentally flawed and irrational agents, we advocate the alternative notion of Homo heuristicus, who uses simple, but ecologically rational strategies to make sound and robust decisions. Based on the conceptual distinction between risky and uncertain environments this paper presents theoretical and empirical evidence that boundedly rational agents prefer simple heuristics over more flexible models. We provide examples of successful heuristics, explain when and why heuristics work well, and illustrate these insights with a fast and frugal decision tree that helps to identify fragile banks.  We conclude that all members of the financial community will benefit from simpler and more transparent products and regulations.

Paper: Social influence and collective opinion formation

The rule is perfect: in all matters of opinion our adversaries are insane.
Mark Twain, Christian Science (1907, Book 1, Ch. 5)

 

 

 

Mehdi Moussaïd, Juliane E. Kämmer, Pantelis P. Analytis, Hansjörg Neth

Social influence and the collective dynamics of opinion formation

Abstract:  Social influence is the process by which individuals adapt their opinion, revise their beliefs, or change their behavior as a result of social interactions with other people. In our strongly interconnected society, social influence plays a prominent role in many self-organized phenomena such as herding in cultural markets, the spread of ideas and innovations, and the amplification of fears during epidemics. Yet, the mechanisms of opinion formation remain poorly understood, and existing physics-based models lack systematic empirical validation. Here, we report two controlled experiments showing how participants answering factual questions revise their initial judgments after being exposed to the opinion and confidence level of others. 

Paper: Melioration as rational choice

Maximization (…) is not a general explanatory principle for behavior. (…)
Melioration (…) is the dynamic process controlling allocation of time across response alternatives.
Herrnstein & Vaughan (1980). Melioration and behavioral allocation, p. 143+172


Chris R. Sims, Hansjörg Neth, Robert A. JacobsWayne D. Gray

Melioration as rational choice: Sequential decision making in uncertain environments

Abstract:  Melioration — defined as choosing a lesser, local gain over a greater longer term gain — is a behavioral tendency that people and pigeons share.  As such, the empirical occurrence of meliorating behavior has frequently been interpreted as evidence that the mechanisms of human choice violate the norms of economic rationality.  In some environments, the relationship between actions and outcomes is known. In this case, the rationality of choice behavior can be evaluated in terms of how successfully it maximizes utility given knowledge of the environmental contingencies.  In most complex environments, however, the relationship between actions and future outcomes is uncertain and must be learned from experience.  When the difficulty of this learning challenge is taken into account, it is not evident that melioration represents suboptimal choice behavior.