Lay Rationalism and Inconsistency between Predicted Experience and Decision

Decision-makers are sometimes depicted as impulsive and overly influenced by ‘hot’, affective factors. The present research suggests that decision-makers may be too ‘cold’ and overly focus on rationalistic attributes, such as economic values, quantitative specifications, and functions. In support of this proposition, we find a systematic inconsistency between predicted experience and decision. That is, people are more likely to favor a rationalistically-superior option when they make a decision than when they predict experience. We discuss how this work contributes to research on predicted and decision utilities; we also discuss when decision-makers overweight hot factors and when they overweight cold factors. Copyright # 2003 John Wiley & Sons, Ltd. key words rationale; rationalism; rule; decision utility; experienced utility; predicted utility; consumption experience; inconsistency; preference reversal Traditional decision theorists assume that when choosing between options that have the same costs, decisionmakers analyze which option will deliver the highest expected outcome utility and choose that option. This is a consequentialist utility analysis approach. In reality, people rarely base their decisions strictly on this approach. In recent years, behavioral decision theorists have proposed that choices are often driven by decisionmakers’ affect toward the choice options (e.g. Frederick, 2002; Hsee & Rottenstreich, 2002; Kahneman, Schkade, & Sunstein, 1998; Loewenstein, 1996; Loewenstein et al., 2001; Rottenstreich & Hsee, 2001; Slovic et al., 2002), and that such affect-driven decisions often lead to different choices than the consequentialist utility analysis would prescribe. For example, when choosing between two equally expensive computers, onewith a faster processor and the other having a more appealing color, decision-makers may focus more on the color of the computers than warranted by a careful consequentialist utility analysis. It appears that decisions are not ‘cold’ enough. Copyright # 2003 John Wiley & Sons, Ltd. *Correspondence to: Christopher K. Hsee, University of Chicago Graduate School of Business, 1101 East 58th Street, Chicago, IL 60637, USA. E-mail: [email protected] Contract/grant sponsors: University of Chicago Graduate School of Business; National Science Foundation; China Europe International Business School. In the present research, we suggest that decisions may be too ‘cold’. Decision-makers may give too much weight to ‘rationalistic’ factors by the consequentialist benchmark. Rationalistic factors are attributes, such as economic value, size, quantity, numerical specifications, and functions. At the end of the article, we will discuss when people overweight rationalistic attributes and when they underweight these attributes, and how to reconcile the present research with research on affect-driven and impulsive decisions. For the time being, we will elaborate on our theory and show that it is possible for decisions to be too cold. Our research focuses on situations where the choice options have a well-defined consumption period, are predicted to induce different experiences during the consumption period, and do not have any other consequentialist differences (such as differences in future costs or benefits). In such situations, the consequentialist utility analysis is reduced to a prediction of which option will deliver the best experience during the consumption period. According to this analysis, the decision-maker should consider an attribute only to the extent that it affects predicted consumption experience. In other words, the decision-makers should predict which option will bring the best consumption experience and base their decision strictly on their prediction. If people indeed resort to this consequentialist analysis, there should be no inconsistency between predicted experience and decision. In reality, decision-makers may not spontaneously make such predictions, and even if they do, they may not strictly base their decisions on such predictions. We propose that decision-makers have a tendency to resist affective influence, and to rely on rationalistic attributes to make their decisions. We refer to this tendency as lay rationalism. Specifically, if one group of people are asked to predict which option in a choice set will bring the best consumption experience and another group of people are asked to indicate which option they will choose, there may be a predicted-experience-versus-decision inconsistency, and the inconsistency will be in a systematic direction: Decision-makers give more weight to rationalistic attributes than do experience-predictors. The remainder of the article is organized as follows. In the next three sections, we identify and study three specific manifestations of lay rationalism: (a) lay economism (focus on economic values), (b) lay scientism (focus on hard rather than soft attributes), and (c) lay functionalism (focus on main function or objective). Table 1 summarizes the general theme of this article, and the three specific manifestations. In each section, we will present evidence for predicted-experience-versus-decision inconsistencies. Then we discuss the significance and potential problems of using predicted-experience-versus-decision Table 1. A summary of the main propositions Decision-makers tend to Decision-makers tend to focus on the following downplay the following factors: factors: General thesis Lay rationalism Rationalistic factors Hedonistic factors Specific Lay economism Total/absolute economic Factors unrelated to total or absolute manifestations payoff economic value but still important for consumption experience, such as trend, social comparision, etc. Lay scientism Hard (objective and Soft (subjective and unequivocal) attributes malleable) attributes Lay functionalism Primary function or Factors unrelated to primary function or primary objective objective but still important for consumption experience ‘Rationalistic’ does not mean ‘rational’. The word ‘rational’ is loaded with too many interpretations and we avoid using this word in this article. Journal of Behavioral Decision Making Copyright # 2003 John Wiley & Sons, Ltd. Journal of Behavioral Decision Making, 16, (in press) inconsistency to study lay rationalism, and suggest alternative methods. We also review the relevant literature and discuss the relationship between our notion of lay rationalism and the literature on rule-based and reason-based choice. We conclude with an integrative framework that reconciles the present research and research on affective and impulsive decisions.