THE INFLUENCE OF CEILING HEIGHT DSN reports from Warsaw this week, where the SPUDM (Subjective Probability, Utility, and Decision Making) conference is wrapping up. Much knowledge was exchanged on the last day in a symposium on experience-based decisions. In other news, always watching the journals for articles that are about to make a splash in […]
WHEN DOES DISEASE SCREENING HELP? The judgment and decision making crowd is buzzing about the idea that screening for certain diseases (such as breast or lung cancer) can be ineffective or even harmful. Some of the readings dans le vent: Peter B. Bach; James R. Jett; Ugo Pastorino; Melvyn S. Tockman; Stephen J. Swensen; Colin […]
COMMON MISUNDERSTANDINGS OF A COMMON MEASURE Dan Goldstein and Nassim Taleb have written a paper called “We don’t quite know what we are talking about when we talk about volatility” which looks at what finance professionals and students do when asked for estimates of standard deviation.In particular, they posed this question: A stock (or a […]
QUESTION FROM A LETTER TO NEWTON In 1693, Samuel Pepys wrote Isaac Newton a letter asking for help solving a probability problem: Which is most probable? A. Six fair dice are tossed independently and at least one “6” appears. B. Twelve fair dice are tossed independently and at least two “6”s appear. C. Eighteen fair […]
MINDLESS SIGNIFICANCE TESTING Some well-made points grow old while no one pays attention to them. One of the most embarrassing for social science is its categorical perception of p-values. Tender of kindred Web site Andrew Gelman and Hal Stern have an article whose name says it all: The Difference Between “Significant” and “Not Significant” is […]
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DEFAULTS DO MATTER Decision Science News and Eric Johnson have teamed up once again to write a piece for the Financial Times on the suprisingly powerful effect of defaults (even simple software defaults) on decisions, from the routine to the life-changing. Their conclusion? History gets written by default. The piece is called “The daily defaults […]
ARE DEFAULT EFFECTS CAUSED BY PUBLIC IGNORANCE? A debate on the Becker-Posner blog includes this hunch by Posner: One possible reason the weak default rule appears to have a significant effect is public ignorance. The probability that one’s organs will be harvested for use in transplantation must be very slight–so slight that it doesn’t pay […]
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WHAT IS LOSS AVERSION?: Loss aversion, or the tendency for people to prefer avoiding losses over acquiring equivalent gains, is a much-cited psychological concept receiving more and more attention in economic analysis. A recent article presents a behavioral definition of loss aversion and dicusses implications for original and cumulative prospect theory. ABSTRACT: “A behavioral definition […]
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TIME IS MONEY: TIME PRESSURE, INCENTIVES, AND THE QUALITY OF DECISION-MAKING Do time pressure and time-dependent incentive schemes have an influence on the quality of decision-making in economics and finance? A recent discussion paper on strategic interaction out of the Max Planck Institute (series) investigates the effects of time pressure on the quality of economically […]
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DOES FORMAL STRATEGIC PLANNING REALLY HELP? J. Scott Armstrong released to the world this worthwhile essay today: “Some experts recommend that firms should adopt a flexible (informal) approach to developing marketing strategy. Formal planning, they say, can be a straightjacket that harms performance, especially when there is much uncertainty and change. Research has shown this […]
