Colour-coded decisions: an experiment on case-based decision theory

Benjamin Radoc

Journal of the Economic Science Association, 2024, vol. 10, issue 2, No 20, 519-530

Abstract: Abstract Decision makers typically possess limited knowledge on states of the world so that use of information from past similar experiences is reasonable. This analogical thinking is formalised by case-based decision theory (CBDT). We created a novel experimental setting to validate the predictive power of CBDT versus Bayesian reasoning. Participants encountered a salient but irrelevant cue which a Bayesian decision maker is likely to ignore but a case-based decision maker may use in assessing similarity. We find that although the irrelevant similarity cue was used, the pattern in participants’ decisions is neither case-based nor Bayesian. The results suggest that CBDT does not apply in simple decision settings where similarity cues are uninformative.

Keywords: Bayesian reasoning; Case-based decision; Gambler’s fallacy; Similarity (search for similar items in EconPapers)
JEL-codes: C91 D81 D9 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s40881-024-00177-3

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