Either, Or: Exploration of an Emerging Decision Theory

Abstract

A novel decision theory is emerging out of sparse findings in economics, mathematics and, most importantly, psychology and computational cognitive science. It rejects a fundamental assumption of the theory of rational decision-making, namely, that uncertain belief rests on independent assessment of utility and probability, and includes envisioning possibilities within its scope.

Several researchers working with these premises, independently of one another, arrived at the conclusion that decision is made by highlighting the positive features of the alternative that will be chosen while opposing it to a losing alternative, whose unpleasant aspects have been stressed. By doing so, decision-makers construct a coherent framework that provides them with a sense of direction in spite of an uncertain future.

This article frames together contributions from different disciplines, often unknown to one another, with the hope of improving the coordination of research efforts. Furthermore, it discusses the status of the novel theory with respect to our current idea of rationality.

Keywords: Preference Reversal, Shackle, Shafer, Constraint Satisfaction Networks, Construction of Narratives, Rationality.

JEL Classification: D80, D89