Friday, 19 November 2010

Sarah Lichtenstein tribute

In St Louis for the SJDM conference and the first event is a very interesting 2-hour precis of the career, contribution and personality of Sarah Lichtenstein.

I hadn't realised she (and her long-term collaborator Paul Slovic) had such a critical influence on the development of the Judgment and Decision-Making field. I've come across her work before, of course - if you have read much in this field you are unlikely to have avoided her. But I often read and remember a result without taking note of who was responsible for it, and I've noted many of the key experiments and theories that she and Slovic carried out, without realising they all came from the same team.

I'm not sure whether the tribute was due to some particular occasion or anniversary, but you'll be pleased to hear she is still alive and well, as is Slovic and the several other pivotal researchers who spoke about her work. Slovic, John Payne, Chris Hsee, Eric Johnson, Elke Weber, Robin Gregory, Ellen Peters and Maya Bar-Hillel all spoke, with closing comments from current SJDM president Valerie Reyna.

Many of them took the opportunity to talk about more recent work and show how Sarah's original research inspired it. The key insight of Lichtenstein-Slovic's work was to show preference reversals. In the classic case, subjects are given two options, A and B, and choose B. But when asked to put a monetary value on each one, they put a higher value on A.

From this, they developed a few basic principles - summarised neatly by John Payne as "the three C's": contingent decision making (decisions depend on context and circumstances), constructed preferences (and beliefs: the idea that preferences are not defined prior to choosing, but arise in the process of considering a choice), and choice architecture (the idea that the framing and presentation of a question influences the answer people give).

Chris Hsee showed some cute examples of preference reversal and outlined a theory of why preferences reverse. Namely that incremental differences are easier to compare when you see two options at once, and so they dominate, while category differences provide more insight when you only see a single option and are asked to put a monetary value on it. For example, if offered a choice between $120 next month versus $100 today, I am likely to see the monetary difference as dominant and pick $120. But if asked to simply put a value on "$120 next month" I may focus on the "next month" part and give the whole package a low valuation, maybe $80. When offered "$100 today" a subject is likely to see "today" as a valuable attribute and may well value the whole offer at $100.

Eric Johnson drew a few examples from William Poundstone's book Priceless, which I read earlier in the year and think is an excellent overview of psychological pricing research. I remembered the examples, but once again had not noticed that they were referring to Sarah Lichtenstein. And Ellen Peters showed the results of some strikingly counterintuitive experiments. Subjects were offered a choice between two (nearly identical) erasers and asked to pick the one they preferred. When a large number 1 was placed between them, 67% of people chose the eraser on the left. When a large number 9 was displayed, 65% chose the one on the right. A remarkable result.

The work of this discipline, following on largely from Lichtenstein and Slovic's experiments more than 40 years ago, is crucial in providing the microfoundations for cognitive economics. Congratulations to Sarah - and Paul - for so many years research and for their inspiration of generations of JDM researchers.

p.s. any readers in or near St Louis who are interested in meeting this weekend, or coming to any of the SJDM sessions, let me know and I'll see what I can do.

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