Designing for Deliberative Goal-Based Decision Making in Environments with Rare Adverse Events—An Experimental Study

Abstract

In a laboratory experiment involving a complex multiperiod investment problem beset by rare adverse events, we investigated the effectiveness of a decision process intervention that involved decisions being elicited as a comprehensive system of short-term targets on three preset intermediate goal dimensions. Recent experiments have demonstrated that in such an environment, participants tend to gradually increase their exposure to risk prior to the occurrence of the first adverse event, a tendency that has been attributed to a misleading evaluation of short-term outcomes. The principle of inhibition of goal-related content following goal attainment and a heuristic model of aspiration adaptation independently predict that the formation of a comprehensive intermediate goal system will produce a stable trade-off between safety and short-term profit. We tested this hypothesis by comparing the decisions of participants required to form such targets with those of a control group allocating resources directly. Our main findings are that this intervention attenuated, if not fully removed, the tendency to increase risk exposure over time and that it improved performance. Our results serve to argue that the designability of decision procedures constitutes a degree of freedom in economic design that can be used to improve how individuals and organizations cope with complexity.