CeDEx workshop - Jerome Busemeyer (Indiana University)

Achieving More Coherent Representations of Latent Utility by Using More Sophisticated Stochastic Models of Manifest Behavior

Decision theorists are becoming increasingly frustrated by the ephemeral nature of utility. The theorist searches for some coherence in the utility function of a decision maker across tasks and contexts, but the behavioral data force the theorist to think otherwise. In particular, choices among gambles can reverse with irrelevant changes in the descriptions of events that result in exactly the same distribution of final outcomes; preferences measured by choices between gambles can reverse when these preferences are measured by instead certainty equivalents; choices among consumer products can reverse by changing the context of the choice set; choices between actions can reverse when these choices are made under different time constraints. The purpose of this paper is to show that by building more sophisticated stochastic models of behavior, and treating utility as a latent parameter of this stochastic process, it is possible to recover the coherence that decision theorists seek. In particular, I will focus on a stochastic model of choice and certainty equivalents called decision field theory. The paper concludes with the point that a trade off must be accepted -- more complex models of behavior are required to recover simpler representations of utility.