The transformative potential of decisions
- Shahar Hechtlinger, Center for Adaptive Rationality, Max Planck Institute for Human Development , Berlin, Germany
- Christina Leuker, Center for Adaptive Rationality, Max Planck Institute for Human Development, Berlin, Germany
- Ralph Hertwig, Center for Adaptive Rationality, Max Planck Institute for Human Development, Berlin, Germany
AbstractPeople face consequential personal decisions throughout their lives. Immigrating to another country or separating from a life-partner are but two examples. How do individuals make such notoriously difficult decisions? Can they make them rationally? We posit that answering both these questions requires understanding a decision’s transformative potential, according to which decisions range in (1) their perceived temporal impact (half-life), (2) the extent to which the decision maker can know whether a choice will generally make them better or worse off (valence uncertainty), and (3) the perceived likelihood of a decision to change the decision maker (personal change). We propose that under the conditions of incomplete information that decisions with high transformative potential inevitably entail, people may make them by recruiting their social and cultural environment and by relying on heuristics. These conditions also render bounded rationality principles (e.g., satisficing) a more plausible rationality benchmark than maximizing expected utilities.
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