Choice adaptation to changing environments: trends, feedback, and observability of change.

Abstract

Making successful decisions in dynamic environments requires that we adapt our actions to the changingenvironmental conditions. Past research has found that people are slow to adapt their choices when faced with change, they tend to be over-reliant on initial experiences, and they are susceptible to factors such as feedback and the direction of change (trend). We build on these findings using two experiments that manipulate feedback and trend in a binary choice task, where decisions are made from experience. Feedback was either partial (providing only the outcome of the selected choice) or full (providing outcomes of the selected and the forgone choice) and the expected value of one option either increased, decreased, or remained constant. Crucially, although the two choice options had equal expected value averaged across all trials, their expected values on individual trials differed, and halfway through 100 choice trials the choice option with higher expected value switched, requiring participants to adapt their choices in order to maximize their outcomes. In Experiment 1, the probability of receiving the high-value outcome changed over time. In Experiment 2, the outcome value changed over time. Generally, we found that participants had trouble adapting to change: full feedback led to more maximization than partial feedback before the switch but did not make a difference after the switch, suggesting stickiness and poor adaptation. Slightly better adaptation was found for changing outcome values over changing probabilities, implying that the observability of the element of change influences adaptation.