Failures of Contingent Thinking
This work addresses decision-making and cognitive biases for behavioral economists and psychologists, but it appears incremental as it builds on existing empirical consensus and formalizes concepts.
The paper tackles the problem of how agents perceive decision problems differently from modelers by introducing a behavioral definition of perceived implication to identify subjective state-spaces, and finds that reducing uncertainty improves contingent thinking while clarifying cognitive demands in dominance comparisons.
We present a behavioral definition of an agent's perceived implication that uniquely identifies a subjective state-space representing her view of a decision problem, and which may differ from the modeler's. By examining belief updating within this model, we formalize the recent empirical consensus that reducing uncertainty improves contingent thinking, and propose a novel form of updating corresponding to the agent 'realizing' a flaw in her own thinking. Finally, we clarify the sense in which contingent thinking makes state-bystate dominance more cognitively demanding than obvious dominance.