Kahneman

Consumers accept technology for medicinal purposes, but not necessarily for foods. These different attitudes toward medicine and food can be explained by the way the situation is framed—or perceived—by consumers. As Kahneman and Tversky (1986) have shown, people show a risk-taking tendency when the outcome is seen as the reduction of a loss ( I do not want to be sick ), but show a risk-aversive tendency when the outcome is identified as a gain ( I want to be healthy ). 

Tait, J. 1988. Public perceptions of biotechnology hazards. J. Chem. Technol. Biotechnol. 43, 363-372. Tversky, A. and Kahneman, D. 1981. The framing of decisions and the rationality of choice. Science 211, 453 158. 

However, as economics examines individual human behaviours more closely, it discovers examples of apparent irrationality that are not accounted for by existing theory. This is true even of purely monetary transactions. For instance, people value sunk costs more than the equivalent opportunity costs, and in experimental gambling situations frequently do not maximize expected value (Thaler 1980 Tversky and Kahneman 1981). In the real world, of course, any gambling reduces one s expected income, and yet gambling is a popular activity. 

Shortly after this workshop, the 2002 Nobel Prize in economics was awarded to Daniel Kahneman and Vernon L. Smith for research in these two areas. 

Of course, also the set of relevant alternatives has to be defined. If too many alternatives exist, a checklist approach might be used to arrive at a shortlist or a dominance analysis can be performed based on the performance matrix of the alternatives. In case of a lack of alternatives various techniques can be explored to generate additional alternatives (cf. Keeney 1992, pp. 198-240). The alternatives to be analyzed in detail should be described carefully because the way they are described can have unintended effects on decision makers preference statements. The examples provided by Tversky and Kahneman (1986) illustrate this point. 

Tversky A, Kahneman D (1991) Loss Aversion in Riskless Choice A Reference-Dependent Model. The Quarterly Journal of Economics 106 1039-1061... 

Tversky A, Kahneman D (1986) Rational Choice and the Framing of Decisions. The Journal of Business 59 S251-S278 UBS (2003) Prices and Earnings. UBS, Zurich... 

See notably Festinger, A Theory ef CcgRifhe OKSonanct and Kahneman, Slovk and Tveisky (cd. ), lodgment under Uncertamfy. 

Tversky and Kahneman, "The framing decisions and the rationality of choice". See also Ainslte, "Specious reward". 

See Kahneman. Slovic and Tversky (eds.), lodgment under Uncertainty, part IV. 

Kahneman, D. Slovk, P. and Tversky, A. (eds-) fudgment under Uncertainty. Cambridge University Press 1982. 

Hence the Idea that well-being is a sum or integral over time of momentaneous states of pleasure and pain (Kahneman, in press) may fail to capture Important aspects of the phenomenon. People may attach value to episodes as a whole rather than to their individual constituents... 

Kahneman, D. (In press), "Assessments of individual well-being A bottom-up approach," in D. Kahneman, E. Diener, and N. Schwartz (eds.), Understanding Quality of Life Scientific Perspectives on Enjoyment and Suffering. 

Kahneman, D., and Miller, D. T. (1986), "Norm theory Comparing reality to its alternatives," Psychological Review 93,126-53. 

Kahneman, D., and Tversky, A. (1982), "The simulation heuristics," in D. Kahneman, P. Slovk, and A. Tversky (eds.), Judgment under Uncertainty, Cambridge University Press, pp. 201-209. 

Thaler, R., Kahneman, D., and Knetsch, J. (1992), "The endowment effect, loss aversion, and status quo bias," in R. Thaler, The Winner s Curse, New York The Free Press, pp. 63-78. 

Tversky, A., and Kahneman, D. (1974), "Judgment under uncertainty," Science 185,1124-30. 

D. Kahneman Heuristics and Biases The Psychology of Intuitive Judgment. Cambridge University Press, 2002. 

Kahneman, D., and Knetsch, J.L., 1991, Valuing pubhc goods the purchase of moral satisfaction. Journal of Environmental Economics and Management, 22 51—Id. 

Another heuristic used in diagnosis is anchoring, whereby initial evidence provides a cognitive anchor for the diagnostician s belief in this hypothesis over the others (Tversky and Kahneman 1974). Consequently, people may tend to seek information that confirms the initial hypothesis and avoid any disconfirming evidence (Einhom and Hogarth 1981 DeKeyser and Woods 1990). This bias is also known as cognitive tuimel vision (Sheridan 1981). 

They don t consider base rates or prior probabilities adequately (Tversky and Kahneman 1974). 

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