Seminar on "Ex Ante Decision Error: Contingent Reasoning from Hypothetical Knowledge "
|Speaker:||Prof. Soo Hong CHEW
Southwestern University of Finance and Economics
|Date:||12 January 2021 (Tuesday)|
|Venue:||WYL314 & Zoom (ID:975 3120 9885)|
Who has not erred? The more significant question concerns one’s ability to correct errors. We explore the extent to which this can be done ex ante using contingent reasoning rather than learning from mistakes ex post. Inspired by an increasingly known example of Savage (1954), we develop a knowledge-based refinement of the sure-thing principle and show its equivalence to a definition of contingent reasoning by aggregating the contingency-induced choices arising from hypothetical knowledge. This helps shape the design of experiments which expose subjects to hypothetical knowledge relating to the choice situation at hand before making the actual decision. We report experiments on decision errors relating to a number of choice puzzles in the literature. Besides Allais’ (1953) common-consequence and common-ratio problems and Ellsberg’s (1961) three-color problem, we discuss the Monty Hall problem, the Cason-Plott (2014) treatment of the Becker-DeGroot-Marschak mechanism, and the acquiring-a-company problem (Samuelson-Bazerman, 1985) which relates to Akerlof’s (1970) lemons problem and the winner’s curse in common value auctions (Capen, Clapp, and Campbell, 1971; Charness and Levin, 2009). Results from these preliminary studies indicate that our hypothetical knowledge treatment is effective in reducing the incidence of ex ante decision error by enhancing the quality of contingent reasoning.
Prof. Chew Soo Hong is a Professor at the Southwestern University of Finance and Economics, and has previously taught at National University of Singapore (NUS), Hong Kong University of Science and Technology (HKUST), University of California, Irvine, Johns Hopkins University and University of Arizona. He is among the pioneers in axiomatic non-expected utility models and is a fellow of the Econometric Society which awarded him the Leonard J. Savage thesis prize. Chew has directed HKUST’s center for Experimental Business Research, inaugurated by Vernon Smith in 1998, and co-directed NUS’ lab for Behavioral x Biological Economics and the Social Sciences which aims to bring together genomics, neuroscience, decision theory, and behavioural and experimental economics to seek a deeper understanding of decision making at the neural and molecular levels. Chew has published in well regarded journals such as Econometrica, Journal of Economic Theory, Journal of Political Economy and Review of Economic Studies as well as more biology-oriented ones including PRSB, Neuron, and PLoS ONE.