Preferences for Proxy Attributes

Gregory W. Fischer, Nirmala Damodaran, Kathryn B. Laskey and David Lincoln
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Gregory W. Fischer: Department of Social and Decision Sciences, Carnegie-Mellon University, Pittsburgh, Pennsylvania 15213
Nirmala Damodaran: School of Urban and Public Affairs, Carnegie-Mellon University, Pittsburgh, Pennsylvania 15213
Kathryn B. Laskey: Decision Science Consortium, Falls Church, Virginia
David Lincoln: CH2M Hill, Bellevue, Washington

Management Science, 1987, vol. 33, issue 2, 198-214

Abstract: A proxy attribute is an indirect measure of an ultimate decision objective. Keeney and Raiffa (Keeney, R. L., H. Raiffa. 1976. Decisions with Multiple Objectives: Preferences and Value Tradeoffs. John Wiley, New York.) argued that assessing utility functions over proxy attributes requires complex inferences that may exceed the human capacity for consistent judgment, thus biasing utility assessments. This hypothesis was tested in an experimental study of preferences for pollution control alternatives. Each decision maker made two sets of utility assessments: the first regarding outcomes described by the fundamental attributes "pollution control cost" and "pollution related illness"; the second regarding outcomes described by the fundamental attribute "pollution control cost" and the proxy attribute "pollution emissions level" (which served as an indirect measure of illness). The subjects displayed a near universal bias to overweight the proxy attribute relative to the prescriptions of expected utility theory. The bias was large, resulting in a substantial loss of expected utility in a simulated policy decision making scenario. To account for this bias, we developed three heuristic models of preferences for proxy attributes: the best guess, worst case, and relative importance models. The results strongly favored the relative importance model, according to which decision makers assess scaling constants by relying on general attitudes regarding the relative importance of different decision objectives rather than on well-articulated preferences for rates of substitution between pairs of attributes.

Keywords: best guess heuristic; decision analysis; multiattribute utility; preference model; proxy attribute; relative importance heuristic; worst case heuristic (search for similar items in EconPapers)
Date: 1987
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