BoundedRationality_TheAdaptiveToolbox.pdf

Is There Evidence for an Adaptive Toolbox? 99
heuristic: "Save a certain part of the income." Since the heuristic works so well
during the period of employment, many individuals see no reason to kick the
"habit" when they retire.
HOW DOES SOCIAL INTERACTION INFLUENCE THE
NATURE, DEVELOPMENT, AND EFFECTIVENESS
OF THE USED HEURISTIC?
The issue of social interaction is closely related to topics discussed by other
groups at the workshop. In addressing the rather fundamental nature of this section,
we tried not to address their questions, but rather to examine the simple
heuristics that are specially matched to cases of conflicting interests. These conflicting
interests can occur in both intra- and interpersonal decision situations.
Examples of the former are intertemporal decisions, such as the aforementioned
savings and addiction problems (see, e.g., Frank 1996). In interpersonal decision
making, myopic payoff maximization might conflict with social norms
such as fairness, reciprocity, etc. The question concerns what mechanisms individuals
use to solve these problems. A related topic is time structure in decision
making, for example, playing an end effect in a repeated game. What mechanisms
do people use to decide when to move from cooperation to defection?
In several experiments, both in psychology and economics, it has been observed
that individuals' decisions differ depending on whether they were made
within a group or a team of decision makers (for a survey, see Levine and Moreland
1990). An interesting example of how behavior can depend on the social
environment is the phenomenon of "social loafing" (Williams et al. 1981). Social
loafing refers to the tendency of subjects to choose a smaller effort level
when acting within a group than they would when taking the same action alone.
This often occurs unnoticed by the subject. The effect is reduced with an increase
in identifiability of the individual effort levels. The interesting point is
that the heuristic used to make the effort level choice obviously is contingent on
the social setting.
A different aspect of social interaction emerges when individuals have to decide
in groups. In such cases the rules and heuristics used by individuals must be
combined with a group (or team) decision rule or heuristic. Kuon et al. (1999)
found that lottery choice decisions made by groups of three are best described by
a simple decision algorithm, called "excess-risk vetoing," which basically com,
bines majority rule with the right to veto if the majority's proposal is to select an
alternative that is dominated by another in the risk-value space. This simple rule
accounts for the experimental observation that groups achieve significantly
higher expected payoffs at a lower risk than individual decision makers.
Another question to address is how relation-specific tools emerge from the
social norms pertaining to the framework of the decision situation. For example,
a whole industry of bargaining experiments has shown that the simple heuristics