Decision making under uncertainty: A comparison of simple scalability, fixed-sample, and sequential-sampling models.

Abstract

The purpose of this article is to investigate the learning and memory processes involved in decision making under uncertainty. In two different experiments, subjects were given a choice between a certain alternative that produced a single known payoff and an uncertain alternative that produced a normal distribution of payoffs. Initially this distribution was unknown, and in the first experiment it was learned through feedback from past decisions, whereas in the second experiment it was learned by observing sample outcomes. In the first experiment, a response deadline was used to limit the amount of time available for making a decision. In the second experiment, an observation cost was used to limit the number of samples that could be purchased. The mean and variance of the uncertain alternative and the value of the certain alternative were factorially manipulated to study their joint effects on choice probability, choice response time (Experiment 1), and number of observations purchased (Experiment 2). Algebraic-deterministic theories developed for decision making with simple gambles fail to explain the present results. Two new models are developed and tested--fixed- and sequential-sampling models--that attempt to describe the learning and memory processes involved in decision making under uncertainty.