What is the role of recognition in decision making?
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What is the role of recognition What is the role of recognition in decision making?in decision making?
Ben NewellUniversity College London
&
Centre for Economic Learning & Social Evolution
Acknowledgements: David Shanks, Nicola Weston, Tim Rakow Funding: ESRC, Leverhulme Trust
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Role of recognition in a cue-Role of recognition in a cue-learning tasklearning task
Previous work examined empirical evidence for building blocks of fast & frugal heuristics (e.g., search, stopping, decision rules) in menu-based tasks
Natural extension – examine evidence for fundamental ‘building block’ – the use of recognition
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What do we mean by recognition?What do we mean by recognition?
Distinction between the truly novel and the previously experienced
E.g. nonwords – “prache”, “elbonics”Repetition of nonwords makes them
recognisable How much ‘weight’ is placed on simple
recognition?
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Status of Recognition Information
Proportion of trials on which
recognized company chosen
Proportion of trials on which
advice is purchased
Special RH = RL RH = RL < NR
Consistent with other cues
RH > RL NR = RH < RL
RH = Recognition High (recognition best predictor of company performance) RL = Recognition Low (recognition poorest predictor of company performance) NR = No Recognition (Free advisor informational equivalent of RH)
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Choices in accord with recognitionChoices in accord with recognition
Predictions: “special” RH = RL = 1.0; “consistent” RH > RL
00.10.20.30.40.50.60.70.80.9
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RH RL NR
Pro
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Advice PurchaseAdvice Purchase
Predictions: “special” RH = RL (=0) < NR; “consistent” NR = RH < RL
00.10.20.30.40.50.60.70.80.9
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RH RL NR
Pro
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f fi
nal 64 t
rials
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Compensatory use of cuesCompensatory use of cues
Evidence for compensatory cue use in all conditions, most in RL
00.10.20.30.40.50.60.70.80.9
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RH RL NR
Pro
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f fi
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ConclusionsConclusions
Recognition information not ascribed “special status” in cue learning task
Treated as ‘just another cue’ in the environment (cf.,PROBEX Juslin & Persson 2002)
What about inferences from memory – do these rely on a ‘different sort of recognition’?
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Recognition, Availability, Recognition, Availability, Familiarity…….Familiarity…….
Powerful influences on inferences from memory
Availability Heuristic (Kahneman & Tversky)
“Overnight Fame” effect (Jacoby)
Recognition Heuristic (Goldstein & Gigerenzer)
No Recognition Recognition +
Availability
(ease of recall)
Recognition
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Recognition HeuristicRecognition Heuristic
Adaptive, non-compensatory, “all or nothing” use of recognition – “no other information is searched for”
Cities task with football team informationWhen is such a rule applied? What are
the consequences…..?
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“Paying for the name…….”
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Paying for the name…..Paying for the name…..
Hoyer & Brown (1990)– 3 brands of peanut butter, – “Aware group”:1 known, 2 unknown brands– 5 trials, opportunity to sample after each choice
Support for use of brand recognition in choice of peanut butter (DVD’s, computers, cars…….??)
% of participants choose known brand
Explicit (sole) use of brand awareness
‘heuristic’
Trial 1 93.5% 60%
Trial 5 74.5% 17%
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Paying for the name…..Paying for the name…..
Hoyer & Brown (1990) contd…. Comparison with “No Awareness” group Significantly more sampling of brands in No Awareness group AND Awareness/quality-difference manipulation showed:
Reliance on Brand Awareness heuristic led to decreased search and final choice of inferior alternative
% of participants chose high quality brand when in an ‘unknown brand’ jar
Brand Awareness 20%
No Awareness 59%
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““A good name is better than A good name is better than riches” (?)riches” (?)
Borges et al. (1999) – can “ignorance” beat the stock market? 180 German lay-people recognition of German stocks 6 month return on DAX 30: Dec 1996 – Jun 1997
Result replicated in 6 out of 8 tests Conclusion – ignorance can beat the stock market or big firms
do well in strong bull (up) markets?
Market Index Rec > 90% Rec < 10%
+34% +47% +13%
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““A good name is better than A good name is better than riches” (?)riches” (?)
Boyd (2001) – test in a down or ‘bear market’ 184 US students recognition of 111 companies randomly
selected from Standard & Poor’s 500 6 month return: June 2000 – December 2000
No evidence to support use of recognition heuristic in a ‘bear’ market
Borges et al result a ‘big firm’ effect?
Market Index Rec > 90% Rec < 10%
-4.54% -14.75% +16.27%
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““A good name is better than A good name is better than riches” (?)riches” (?)
Rakow (2002) – further test in a strong market 53 UK students recognition of 30 companies in Italian Mib 30 8 week return: October – December 2002 Compared recognition portfolios, anti-recognition portfolios and
expert portfolio with market index
Only 7 out of 53 recognition portfolios outperformed market index How robust is recognition heuristic as an investment tool?
Market Index Expert Recognition Portfolio
Anti-Recognition Portfolio
+21.0% +21.0% +13.3% +26.2%
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When will recognition be When will recognition be accurate…?accurate…?
It depends on the domain…..
f(n) = 2(n / N) (N - n / N -1) + (N – n / N) (N – n – 1 / N – 1) ½ + (n / N) (n – 1 / N – 1)
f(n) = proportion correct inferences
= recognition validity
=knowledge validity
N = reference class of objects
n = recognized objects
(fast and frugal?)
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Deliberate or automatic?Deliberate or automatic?
Automatic ‘feeling of familiarity’ + deliberate application of heuristic?
“I recognise it so I’ll choose it” – deliberate selection and use of a heuristic from the toolbox? (cf., Kahneman & Frederick, 2002)
Recognition + “relevance check”. Enron?
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ConclusionsConclusions
Cue learning: recognition treated like other cues in the environment
Consumer research:Exploitation of reliance on recognition
Stock market investment: ‘big firm’ rather than recognition effect – how generalisable?
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Where to next?Where to next?
Further tests of use of recognition in memory-based inference
Cost/benefit effects on use of recognition
Discussion of adaptive/maladaptive use of recognition
Further specification of the domains in which the ‘recognition heuristic’ applies