Optimal utility and probability functions for agents with finite computational precision
When making economic choices, such as those between goods or gambles, humans act as if their internal representation of the value and probability of a prospect is distorted away from its true value. These distortions give rise to decisions which apparently fail to maximize reward, and preferences th...
| Main Authors: | , , , |
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| Format: | Journal article |
| Language: | English |
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National Academy of Sciences
2020
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| _version_ | 1826262092591661056 |
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| author | Juechems, KO Balaguer, J Spitzer, B Summerfield, C |
| author_facet | Juechems, KO Balaguer, J Spitzer, B Summerfield, C |
| author_sort | Juechems, KO |
| collection | OXFORD |
| description | When making economic choices, such as those between goods or gambles, humans act as if their internal representation of the value and probability of a prospect is distorted away from its true value. These distortions give rise to decisions which apparently fail to maximize reward, and preferences that reverse without reason. Why would humans have evolved to encode value and probability in a distorted fashion, in the face of selective pressure for reward-maximizing choices? Here, we show that under the simple assumption that humans make decisions with finite computational precision––in other words, that decisions are irreducibly corrupted by noise––the distortions of value and probability displayed by humans are approximately optimal in that they maximize reward and minimize uncertainty. In two empirical studies, we manipulate factors that change the reward-maximizing form of distortion, and find that in each case, humans adapt optimally to the manipulation. This work suggests an answer to the longstanding question of why humans make “irrational” economic choices. |
| first_indexed | 2024-03-06T19:30:54Z |
| format | Journal article |
| id | oxford-uuid:1d7169ff-72a5-4a77-a1d4-f9a5f8ec3151 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-06T19:30:54Z |
| publishDate | 2020 |
| publisher | National Academy of Sciences |
| record_format | dspace |
| spelling | oxford-uuid:1d7169ff-72a5-4a77-a1d4-f9a5f8ec31512022-03-26T11:10:45ZOptimal utility and probability functions for agents with finite computational precisionJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:1d7169ff-72a5-4a77-a1d4-f9a5f8ec3151EnglishSymplectic ElementsNational Academy of Sciences2020Juechems, KOBalaguer, JSpitzer, BSummerfield, CWhen making economic choices, such as those between goods or gambles, humans act as if their internal representation of the value and probability of a prospect is distorted away from its true value. These distortions give rise to decisions which apparently fail to maximize reward, and preferences that reverse without reason. Why would humans have evolved to encode value and probability in a distorted fashion, in the face of selective pressure for reward-maximizing choices? Here, we show that under the simple assumption that humans make decisions with finite computational precision––in other words, that decisions are irreducibly corrupted by noise––the distortions of value and probability displayed by humans are approximately optimal in that they maximize reward and minimize uncertainty. In two empirical studies, we manipulate factors that change the reward-maximizing form of distortion, and find that in each case, humans adapt optimally to the manipulation. This work suggests an answer to the longstanding question of why humans make “irrational” economic choices. |
| spellingShingle | Juechems, KO Balaguer, J Spitzer, B Summerfield, C Optimal utility and probability functions for agents with finite computational precision |
| title | Optimal utility and probability functions for agents with finite computational precision |
| title_full | Optimal utility and probability functions for agents with finite computational precision |
| title_fullStr | Optimal utility and probability functions for agents with finite computational precision |
| title_full_unstemmed | Optimal utility and probability functions for agents with finite computational precision |
| title_short | Optimal utility and probability functions for agents with finite computational precision |
| title_sort | optimal utility and probability functions for agents with finite computational precision |
| work_keys_str_mv | AT juechemsko optimalutilityandprobabilityfunctionsforagentswithfinitecomputationalprecision AT balaguerj optimalutilityandprobabilityfunctionsforagentswithfinitecomputationalprecision AT spitzerb optimalutilityandprobabilityfunctionsforagentswithfinitecomputationalprecision AT summerfieldc optimalutilityandprobabilityfunctionsforagentswithfinitecomputationalprecision |