Does Decision Quality (Always) Increase with the Size of Information Samples? Some Vicissitudes in Applying the Law of Large Numbers

Yaakov Kareev () and Klaus Fiedler

Discussion Paper Series from The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem

Abstract: Adaptive decision-making requires that environmental contingencies between decision options and their relative advantages and disadvantages be assessed accurately and quickly. The research presented in this article addresses the challenging notion that contingencies may be more visible from small than large samples of observations. An algorithmic account for such a "less-is-more" effect is offered within a threshold-based decision framework. Accordingly, a choice between a pair of options is only made when the contingency in the sample that describes the relative utility of the two options exceeds a critical threshold. Small samples – due to their instability and the high dispersion of their sampling distribution – facilitate the generation of above-threshold contingencies. Across a broad range of parameter values, the resulting small-sample advantage in terms of hits is stronger than their disadvantage in terms of false alarms. Computer simulations and experimental findings support the predictions derived from the threshold model. In general, the relative advantage of small samples is most apparent when information loss is low, when decision thresholds are high, and when ecological contingencies are weak to moderate.

Pages: 66 pages
Date: 2004-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Journal of Experimental Psychology: Learning, Memory and Cognition, 2006, vol. 32, pp. 883-903.

Downloads: (external link)
http://ratio.huji.ac.il/sites/default/files/publications/dp347.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://ratio.huji.ac.il/sites/default/files/publications/dp347.pdf [302 Moved Temporarily]--> https://ratio.huji.ac.il/sites/default/files/publications/dp347.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:huj:dispap:dp347

Access Statistics for this paper

More papers in Discussion Paper Series from The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem Contact information at EDIRC.
Bibliographic data for series maintained by Michael Simkin ().