Past Choices Research Articles

A Causal Role for Posterior Medial Frontal Cortex in Choice-Induced Preference Change

After a person chooses between two items, preference for the chosen item will increase and preference for the unchosen item will decrease because of the choice made. In other words, we tend to justify or rationalize our past behavior by changing our attitude. This phenomenon of choice-induced preference change has been traditionally explained by cognitive dissonance theory. Choosing something that is disliked or not choosing something that is liked are both cognitively inconsistent and, to reduce this inconsistency, people tend to change their subsequently stated preference in accordance with their past choices. Previously, human neuroimaging studies identified posterior medial frontal cortex (pMFC) as a key brain region involved in cognitive dissonance. However, it remains unknown whether the pMFC plays a causal role in inducing preference change after cognitive dissonance. Here, we demonstrate that 25 min, 1 Hz repetitive transcranial magnetic stimulation applied over the pMFC significantly reduces choice-induced preference change compared with sham stimulation or control stimulation over a different brain region, demonstrating a causal role for the pMFC.

Time Discounting in Strategic Contests

In many contests, such as political campaigns or R&D expenditures, there is at least some trade‐off between immediate money outlay and potential future benefits. This timing aspect has mostly been ignored by the contest literature. If contestants exhibit a strong present bias, such as that shown by past individual choice experiments, then benefits that are deferred to the future will lead to a significant drop in investment. This paper uses controlled laboratory experiments to explore how the timing of prize payment impacts behavior in a contest with a unique Nash equilibrium strategy. We find no evidence that people significantly discount future prizes in our contests, despite the fact that we do replicate present bias in a separate individual choice experiment.

The Impotence of the Value Pump

Many philosophers have argued that agents must be irrational to lose out in a ‘value pump’ or ‘money pump’. A number of different conclusions have been drawn from this claim. The ‘Value Pump’ (VP) has been one of the main arguments offered for the axioms of expected utility theory; it has been used to show that options cannot be incomparable or on a par; and it has been used to show that our past choices have normative significance for our subsequent choices. In this article, I argue that the fact that someone loses out in a value pump provides no reason to believe that they are irrational. The VP is impotent.

Orbitofrontal cortex, emotional decision-making and response to cognitive behavioural therapy for psychosis

Grey matter volume (GMV) in the orbitofrontal cortex (OFC) may relate to better response to cognitive behavioural therapy for psychosis (CBTp) because of the region׳s role in emotional decision-making and cognitive flexibility. This study aimed to determine the relation between pre-therapy OFC GMV or asymmetry, emotional decision-making and CBTp responsiveness. Emotional decision-making was measured by the Iowa Gambling task (IGT). Thirty patients received CBTp+standard care (CBTp+SC; 25 completers) for 6–8 months. All patients (before receiving CBTp) and 25 healthy participants underwent structural magnetic resonance imaging. Patients׳ symptoms were assessed before and after therapy. Pre-therapy OFC GMV was measured using a region-of-interest approach, and IGT performance was measured as overall learning, attention to reward, memory for past outcomes and choice consistency. Both these measures, were comparable between patient and healthy groups. In the CBTp+SC group, greater OFC GMV correlated with positive symptom improvement, specifically hallucinations and persecution. Greater rightward OFC asymmetry correlated with improvement in several negative and general psychopathology symptoms. Greater left OFC GMV was associated with lower IGT attention to reward. The findings suggest that greater OFC volume and rightward asymmetry, which maintain the OFC׳s function in emotional decision-making and cognitive flexibility, are beneficial for CBTp responsiveness.

Institutional Exploitation and Exploration: Socio-Spatial Distance of New Partner Selection

Concepts of exploration and exploitation are widely used to interpret organizational behavior, typically classifying any new relationship as exploration and the continuation of an existing relationship as exploitation. This delineation from the organizational perspective, however, fails to differentiate between the relative socio-spatial distances of the two prospective partners. Arguably, these differences matter for the relative novelty of information that a new partner brings, not only to the organizational entities involved in the relationship, but to the institutional fields within which they are embedded. Conceptualizing novelty along a continuum of institutional distance across field boundaries, I develop a more robust theory of partner selection that distinguishes two types of organizational exploration: institutional exploitation, the initiation of a new relationship for the ego organization that involves the replication of past partner choices of others within the ego’s field, and institutional exploration, the formation of a relationship with a new organization that exists outside of the ego’s field. I test this theory using a novel, longitudinal dataset of U.S.-based foundations’ transnational grantee choices. I find that objective market- and firm-level uncertainty lead to institutional exploitation in new investment relationships. However, my analysis shows that exploitation is tempered by subjective perceptions of uncertainty rooted in the particular norms of an organization’s institutional environment. Larger professionalized foundations often see novelty as opportunity, embracing institutional exploration and the selection of new partners from outside the field, while their less well-endowed peers view it as risk, resorting to institutional exploitation in an effort to form new partnerships that feel safer. Furthermore, foundations that respond to unique personal environments, such as family foundations and corporate foundations, engage in greater degrees of institutional exploration. These findings encourage the utility of including more nuanced degrees of exploration in future studies of partner selection.

The Pattern of Home Ownership Across Cohorts and its Impact on the Net Wealth Distribution: Empirical Evidence from Germany and the US

In this empirical paper we analyze the link between homeownership across cohorts and the net wealth distribution. In particular we are interested in the effect of the pattern of ownership across cohorts. Given that wealth accumulates over the life-cycle and that owners are wealthier than renters, past tenure choices, affecting today's share of owners for different cohorts, should be related to current wealth levels and inequality. In order to gauge the effect of the ownership structure over cohorts on the distribution of net wealth we impose the homeownership pattern of the US on Germany and ask: What would the net wealth distribution in Germany look like if German households were distributed across tenure status along cohorts the same way as those in the US? Our results indicate that the ownership rate and pattern within cohorts is closely linked to the wealth distribution. Imposing the structure of the US on Germany leads to a large increase in the German median and reduces wealth inequality. We show that some of these effects can be attributed to the difference in ownership shares between old cohorts in Germany and the US as often mentioned in the literature, but this effect appears to be less pronounced than expected. Past tenure choice indeed affects today's net wealth distribution.

Learning Through Experience: The Impact on SME Entry Mode Choice

Learning from experience has attracted considerable research attention over the last dec-ades. Yet it is unclear how firms learn from past entry mode choices. In this paper we develop and test theory that suggests that entry mode learning might be non-linear and that firms learn from equity mode, non-equity mode and international experience. Drawing on a sample of 185 German SMEs, we show that non-equity entry mode experience leads to higher resource com-mitment if firms also possess complementary international experience. In contrast, equity entry mode experience shows signs of decreasing marginal effects. Our study contributes to the SME entry mode literature and offers implications for future research and practice.

Stimulus similarity determines the prevalence of behavioral laterality in a visual discrimination task for mice.

Animal choices depend on direct sensory information, but also on the dynamic changes in the magnitude of reward. In visual discrimination tasks, the emergence of lateral biases in the choice record from animals is often described as a behavioral artifact, because these are highly correlated with error rates affecting psychophysical measurements. Here, we hypothesized that biased choices could constitute a robust behavioral strategy to solve discrimination tasks of graded difficulty. We trained mice to swim in a two-alterative visual discrimination task with escape from water as the reward. Their prevalence of making lateral choices increased with stimulus similarity and was present in conditions of high discriminability. While lateralization occurred at the individual level, it was absent, on average, at the population level. Biased choice sequences obeyed the generalized matching law and increased task efficiency when stimulus similarity was high. A mathematical analysis revealed that strongly-biased mice used information from past rewards but not past choices to make their current choices. We also found that the amount of lateralized choices made during the first day of training predicted individual differences in the average learning behavior. This framework provides useful analysis tools to study individualized visual-learning trajectories in mice.

How do past mode choices influence subsequent entry? A study on the boundary conditions of preferred entry modes of retail firms

This study analyzes whether the preferred entry modes, i.e., the foreign market entry modes that have been most frequently used in the past, influence a retail firm's subsequent mode choices. We discuss the limitations of this relationship by highlighting the external and internal factors that determine the effects of preferred modes on later entry decisions. To provide insight into these issues, we refer to institutional- and knowledge-based reasoing and use a data set that includes 309 market entries by the 30 leading retailers between the years 1960 and 2008. The results indicate that preferred entry modes show strong explanatory power with regard to the subsequent choice of full- and shared-control modes in entering new country markets. Although this relationship is diminished by the external institutional environment (e.g., political distance), firm-specific capabilities, e.g., international experience and internationalization speed, reinforce the use of preferred entry modes.

Role of dopamine D2 receptors in optimizing choice strategy in a dynamic and uncertain environment.

In order to investigate roles of dopamine receptor subtypes in reward-based learning, we examined choice behavior of dopamine D1 and D2 receptor-knockout (D1R-KO and D2R-KO, respectively) mice in an instrumental learning task with progressively increasing reversal frequency and a dynamic two-armed bandit task. Performance of D2R-KO mice was progressively impaired in the former as the frequency of reversal increased and profoundly impaired in the latter even with prolonged training, whereas D1R-KO mice showed relatively minor performance deficits. Choice behavior in the dynamic two-armed bandit task was well explained by a hybrid model including win-stay-lose-switch and reinforcement learning terms. A model-based analysis revealed increased win-stay, but impaired value updating and decreased value-dependent action selection in D2R-KO mice, which were detrimental to maximizing rewards in the dynamic two-armed bandit task. These results suggest an important role of dopamine D2 receptors in learning from past choice outcomes for rapid adjustment of choice behavior in a dynamic and uncertain environment.

The role of forgone opportunities in decision making under risk

We present two experiments designed to study the role of forgone opportunities in decision making under risk. In the first one, we face individuals with a dynamic environment in which their decisions, together with chance, determine their future options. We find that previously faced opportunities influence subsequent choices in predictable ways. Having faced worse options in the past significantly increases individuals’ risk aversion and having faced better options reduces it. These patterns are at odds with most existing decision theories, including Expected Utility Theory and standard implementations of Prospect Theory, the dominant models of economic decision making. In our second experiment, we present participants with a similar decision environment, but in which the opportunities they face do not depend on their past choices. The effect of previously faced options on decision behavior in this environment is considerably reduced. This shows that being responsible for forgoing opportunities is an important factor in their influence on behavior, which underscores the relevance of emotions linked to counterfactual thinking, like regret or satisfaction. These results highlight that theories formulated in cognitive terms are not enough to provide an adequate account of the role of forgone opportunities in decision making under risk and uncertainty.

Cognitive dissonance resolution is related to episodic memory.

The notion that our past choices affect our future behavior is certainly one of the most influential concepts of social psychology since its first experimental report in the 50 s, and its initial theorization by Festinger within the “cognitive dissonance” framework. Using the free choice paradigm (FCP), it was shown that choosing between two similarly rated items made subjects reevaluate the chosen items as more attractive and the rejected items as less attractive. However, in 2010 a major work by Chen and Risen revealed a severe statistical flaw casting doubt on most previous studies. Izuma and colleagues (2010) supplemented the traditional FCP with original control conditions and concluded that the effect observed could not be solely attributed to this methodological flaw. In the present work we aimed at establishing the existence of genuine choice-induced preference change and characterizing this effect. To do so, we replicated Izuma et al.’ study and added a new important control condition which was absent from the original study. Moreover, we added a memory test in order to measure the possible relation between episodic memory of choices and observed behavioral effects. In two experiments we provide experimental evidence supporting genuine choice-induced preference change obtained with FCP. We also contribute to the understanding of the phenomenon by showing that choice-induced preference change effects are strongly correlated with episodic memory.

The Revisability Principle

Debates over the “right to be forgotten” loom ever larger. Europe increasingly recognizes such a right. To many in the United States, however, a right to be forgotten appears misguided and deeply foreign, inconsistent with the First Amendment’s commitment to uninhibited, robust, and wide-open exchange. But even here, the growing realization that everything people do can be, and often is, permanently recorded and stored has begun to provoke growing disquiet.This Article has two purposes. The first is to explain the principle rooted in American law and culture that most strongly supports an American right to be forgotten — a deep constitutional commitment to what this Article calls the “revisability principle.” It is the principle that an individual’s identity should always remain, to some significant extent, revisable; that no person should be tied forever to her identity at a particular moment in the distant past, and that to the extent individuals must forever account for who they were long ago, their individual freedom to act and speak as they wish — both in the past and in the future — is powerfully constrained. Personal autonomy is abridged when individuals lose the capacity to control, to some significant degree, their own destiny by fashioning a conception of themselves through successive decisions about who they wish to be through deliberate choices that they make. The second purpose of this Article is to explain how emerging technologies place unprecedented pressures on the revisability principle. Technologies and social practices that result in the permanent storage, ready access, and widespread dissemination of past mistakes or even prior identities that a person in the present hopes to leave behind impinges on the principle of revisability by making it more and more difficult to disassociate oneself from past choices that no longer reflect one’s self-conception. To the extent individuals must forever account for decisions in the distant past — people they in some sense no longer are — their freedom to speak, engage, and participate in democratic society and cultural creation is powerfully constrained. A capacity to engage in self-revision is critical to fully realizing the First Amendment’s commitment to debate that is uninhibited, robust and wide-open.

Yes, we really do need more entry mode studies! A commentary on Shaver

In a recent commentary published in this journal, Shaver raises the provocative question of whether we need more entry mode studies. After assessing the reasons for Shaver’s doubts and further developing his broad research suggestions, we conclude that this question should be answered affirmatively. We derive three important questions for future entry mode research: (1) What determines the evolution of operations resulting from suboptimal mode choices? (2) What causes the replication of past mode choices? (3) How is the entry decision process structured? Focusing on these questions should assure a bright future for entry mode research.

Consumer Inertia, Choice Dependence, and Learning from Experience in a Repeated Decision Problem

Understanding when and how individuals think about real-life problems is a central question in economics. This paper studies the role of inertia (inattention), state dependence, and learning. The empirical setting is a tariff experiment, when optional measured tariffs for local telephone calls were introduced unanticipatedly. We find that consumers tend to align their choices of tariff and telephone use levels correctly. Despite low potential savings, mistakes are not permanent, as individuals actively engage in tariff switching in order to reduce the monthly cost of telephone service. Ignoring unobservable heterogeneity and the endogeneity of past choices would have reversed these results.

Financial Investment and Human Capital During Life Cycle

This paper explores the problem of an agent who invests in financial assets, works and/or accumulates human capital, and retires at the end of time horizon. His/her initial endowments consist of an amount of liquid assets (maybe because of inheritance) and a number of units of human capital.Human capital is measured in efficiency units, as in the theory of growth. By contrast to the theory of growth, efficiency units increase as the result of training and education. Training is a costly activity; in addition to paying educational costs, the agent devotes part of his/her human capital exclusively to education and, thus, he/she can devote less time to earn labour income.The methodology similar to the Kreps-Proteus (KP) and Epstein-Zin (EZ) preferences. The certainty equivalent of life-time utility is evaluated by means of the negative exponential function. In addition, the wealth at the beginning of a period is an anchor point which determines the attitude to risk for that period. The attitude to risk and the utility of wealth evolve over time under the impact of past experiences and the anticipation of future events.Some of the main results are: (i) Optimal policies are linear functions of wealth: the marginal propensities to consume and to invest in financial assets are determined recursively and they are independent of the level of wealth of each period. (ii) The Certainty equivalent (CE) of the portfolio’s risk premium is the sum of the CE of the risk premia attached to financial assets and human capital, both expressed per unit of initial wealth of a period. (iii) The attitude to risk is characterized by an intrinsic attitude which is unchanged during the lifetime of the individual. This attitude is modified depending on whether the agent faces dynamic or timeless choices. In the case of dynamic choices, the intrinsic measure is modified by the realization of random events related to past choices. In timeless choices, the atemporal measure allows the agent to evaluate future anticipations under the experiences of the past. (iv) On economic considerations alone, the choice of educational plan at the beginning of the life cycle is either zero, or the maximum possible. It is independent of the measure of risk aversion and depends on other (not specified) personal preference and social conditions.

Human collective intelligence under dual exploration-exploitation dilemmas.

The exploration-exploitation dilemma is a recurrent adaptive problem for humans as well as non-human animals. Given a fixed time/energy budget, every individual faces a fundamental trade-off between exploring for better resources and exploiting known resources to optimize overall performance under uncertainty. Colonies of eusocial insects are known to solve this dilemma successfully via evolved coordination mechanisms that function at the collective level. For humans and other non-eusocial species, however, this dilemma operates within individuals as well as between individuals, because group members may be motivated to take excessive advantage of others' exploratory findings through social learning. Thus, even though social learning can reduce collective exploration costs, the emergence of disproportionate “information scroungers” may severely undermine its potential benefits. We investigated experimentally whether social learning opportunities might improve the performance of human participants working on a “multi-armed bandit” problem in groups, where they could learn about each other's past choice behaviors. Results showed that, even though information scroungers emerged frequently in groups, social learning opportunities reduced total group exploration time while increasing harvesting from better options, and consequentially improved collective performance. Surprisingly, enriching social information by allowing participants to observe others' evaluations of chosen options (e.g., Amazon's 5-star rating system) in addition to choice-frequency information had a detrimental impact on performance compared to the simpler situation with only the choice-frequency information. These results indicate that humans groups can handle the fundamental “dual exploration-exploitation dilemmas” successfully, and that social learning about simple choice-frequencies can help produce collective intelligence.

The juvenile crime dilemma

I develop a dynamic model of behavior to analyze juvenile crime. Forward-looking youths consistently decide between crime and legal activities depending on their endowment of work- and crime-specific human capital, which in turn is shaped by their history of past choices. The model explicitly recognizes the contrasting levels of punishment of the juvenile and adult criminal systems. In order to evaluate whether the model explains the evolution of crime, I calibrate it and test whether it can account for the observed variations in juvenile crime levels across changes in economic and legal conditions. The model is able to reproduce 91 percent of the recent increase in juvenile crime in Uruguay by affecting key model parameters in line with observed facts (a decrease in the relative returns of legal activities and the introduction of a lenient juvenile crime regulation and enforcement strategy). Counterfactual model results predict that a reduction in the age of criminal majority would significantly lower juvenile crime involvement. However, if the transmission of crime-related skills in correctional facilities were strong enough, harsher punishments to juveniles would increase the likelihood of criminal involvement later in life.

Analysis of Impacts on Dispatcher's Route Choice Behaviour by Road Improvements on Using a Trial and Error Learning Model

In previous research, a route choice behavior model was constructed using trial and error type learning dynamics derived from evolutionary game theory. The model can represent the route choice behavior seen in logistics companies, such as the consideration of daily variations in travel time and variations in travel time due to traffic accidents, the choice of multiple routes, and the changing of route choice behavior based on evaluations of past route choice behavior. After having adopted an actual strategy (route choice), the model is such that the strategy is assumed to change according to whether the strategy was successful or not. This paper used this model to analyze the effect of actual planned road projects on the route choice behavior of logistics companies. Analysis was shown to be possible by using the micro-simulation package VISSIM to estimate the change in the average travel time and the standard deviation of the travel time due to road projects, and using the results as the input value for the model. Furthermore, by observing the transition in route selectivity, it was possible to understand how route selectivity varies and the way in which the selectivity finally converges according to the change in the average travel time and in the standard deviation of travel time due to road projects.

Methodological Pluralism and Constitutional Interpretation

This article takes up a significant yet surprisingly overlooked question: What accounts for the Supreme Court’s lack of methodological uniformity in constitutional interpretation? The question can be phrased in other ways: Why do strong methodological pronouncements in one case go unfollowed and unacknowledged in the next? Why, to use an example, does the originalist analysis of District of Columbia v. Heller not create a presumption that subsequent Second Amendment cases must also be analyzed via an originalist approach?An easy answer suggests itself — the justices simply do not want to bind themselves to someone else’s preferred methodology. They hold strongly divergent views, and advocate on behalf of those views in their opinions. Each justice might be willing to adhere to a single approach, but only so long as it is the one he or she favors. This easy answer turns out to be, at best, incomplete. There are many respects in which the Court does adhere to its past methodological choices, such as with Chevron deference or the tiered-scrutiny framework. This adherence is both unremarkable and, more generally, consistent with the application of stare decisis, which, properly understood, entails being bound by some past court’s preferences. Given that, we might imagine that stare decisis ought to apply to broader interpretive commitments. Indeed, a recent wave of scholarship has argued in favor of the application of stare decisis to the process of statutory interpretation, while at the same time demonstrating that a number of state courts have achieved methodological uniformity in that domain. Along the way, several of these scholars have suggested that their arguments might apply to constitutional interpretation as well. In attacking these questions, this article attempts, first, to unpack the relationship between stare decisis and interpretive methodology, and to understand when stare decisis will apply to methodology and when it will not. It concludes that, at least at the broad level of determining constitutional meaning, stare decisis and interpretive methodology are an inherently unstable combination. The attainment of methodological uniformity, it turns out, is better analyzed and understood in terms of consensus. Simply put, large-scale methodological uniformity results not from the doctrinal pressure of stare decisis, but rather as a product of a settled understanding that a given method is the appropriate way to engage in legal reasoning. Second, the article explores explanations for the methodological pluralism that characterizes the Court’s decision making. That pluralism may be a product of a tacit consensus that pluralism is the most legitimate approach to constitutional interpretation. But it may also be a default position reached due to the lack of any mechanism for forcing consensus, or the product of external, political limitations on the Court’s ability to consistently follow the logic of any single methodology. More likely still is the possibility that each of these explanations is at least partially correct.