Competition can facilitate human decision making under risk and uncertainty

Lay summary by Fabia Högden

Researchers who investigate human decision making often report flaws and biases in their participants’ choices. Under many real-world choice conditions, however, this human choice behavior can be considered adaptive instead of irrational and error-prone.

Imagine you were to choose between two options A and B. Option A will give you a monetary reward 70% of the time, option B will give you the same reward only 30% of the time. To optimize your gains you should always choose option A. Surprisingly, this is not what people do. When presented with this scenario in an experiment, participants choose option A roughly 70% of the time and option B roughly 30% of the time. This phenomenon is referred to as probability matching.

Probability matching is often regarded as an inferior choice strategy but Christin Schulze and her colleagues aimed to show that it can be adequate under real-life circumstances. Specifically, if you compete with others for the same monetary resource, it can be beneficial to sometimes choose the low-probability option. You may receive reward in only 30% of the time but you’ll have to share the reward with fewer competitors. Different strategies can be reasonable, depending on the behavior of the people you compete with.

Schulze and her team investigated this aspect in their experiments. Their participants competed with computerized opponents in the above described scenario. They observed that after some time participants adopted the choice strategy that was optimal regarding their opponent’s behavior. To find out how they accomplished this, the researchers compared their performance with mathematical formalizations of different learning processes. They concluded that participants learned two separate things: a) to estimate the profitability of each option and b) to take their opponent’s behavior into account.

These results underline the importance of considering aspects of real-life decision making, like the presence of competitors, in studying choice behavior. We rarely make our decision in social isolation but we compete with others, be it in sports, for money, or for social status. The take-home message is that what looks like irrationality when regarded at the individual level is really the result of a flexible strategy when regarded under realistic circumstances of competition.

For further information

Read the Cognitive Psychology original research article which this summary is based on Of matchers and maximizers: How competition shapes choice under risk and uncertainty (April 2015).

Visit the profile of the research ambassador, Fabia Högden, who wrote this summary.

STM Digest is a collection of lay summaries published next to original research articles on ScienceDirect, provided free of charge, and accessible to everyone.

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