To Choose or Not to Choose: The Effects of Conflict and Risk on Choice Deferral

When making decisions, people are often faced not only with a choice among available alternatives, but also with the option of deferring choice. Two factors have been shown to influence the likelihood of choice deferral, namely, choice difficulty and deferral-related risk. Two experiments considered the interaction between these two factors. Choice difficulty was operationalized as the presence versus absence of a dominant alternative in an initial two-option set. Risk was operationalized as the probability that the choice set will become less desirable as a result of delay. It was found that the likelihood of choice deferral is highly influenced by level of risk when a choice is straightforward but has little influence when it is difficult. However, this finding appears limited to situations in which risk is stated explicitly. The results suggest that, at least in some situations, people may have trouble integrating deferralrelated risk information when making difficult choices. To choose or not to choose 4 To choose or not to choose: The effects of conflict and risk on choice deferral When making decisions, one must often determine not only what to choose but also when to choose. Deciding when to choose can be critical to the achievement of goals. For example, when investing in the stock market, deciding not only what stocks buy and sell to but also when to do so are important decisions with weighty financial consequences. In public policy making, determining the appropriate time to introduce a legislative bill or to begin foreign policy negotiation is pivotal to the initiative’s success (Kingdon, 1995; Renshon & Larson, 2002). Likewise, the timing of physicians’ action—or inaction—literally can be a matter of life and death. Deciding when to act is an essential component of these and many other decisions frequently encountered in everyday life. In short, while timing may not be everything, it is certainly quite important. The present work focuses on timing as it relates to the quality of the choice set. In everyday situations, choice sets often change over time rather than remaining static throughout the decision process. Applying for a job position, purchasing an airplane ticket, or choosing an unexplored research topic typically involves choice sets that change over time. Choosing early can mean missing out on better alternatives that would have come along later, while waiting comes with a risk of losing the initial options as they become unavailable over time (Bearden, Murphy, & Rapoport, 2005; Eisenhardt, 1993; Yates & Tschirhart, 2006). This leaves open the questions of how people should and how they do decide when to commit to an available alternative versus to continue to seek additional options. To choose or not to choose 5 Despite its critical importance, the question of when choices are made has received considerably less attention than that of what should be chosen. Rational choice models (von Neumann & Morgenstern, 1947), the underpinnings of economics and decision science, have focused on offering a normative perspective on choice in the context of static sets. Only recently have researchers begun to address issues surrounding when an alternative should be chosen from a dynamic set (that is, one in which the alternative set changes over time; Corbin, 1980). One rational choice model that has been extended to dynamic situations is expected utility theory, according to which the expected utility of an alternative is the sum of the utility (the value to the individual) of each possible outcome weighted by its likelihood of occurrence. For example, in a static situation, the utility of choosing a lottery ticket with an 80% chance of winning $50 and a 20% chance of winning nothing is (.8 * $50) + (.2 * 0) = 40, assuming for ease that the utility is the dollar value. When presented with a choice between multiple alternatives, the normative choice is the alternative with the highest expected utility. In dynamic situations, expected utility theory can be applied specifically to the decision of whether or not to defer (Bastardi & Shafir, 1998). In contexts of dynamic choice sets, in which additional options can become available and current options can become unavailable over time, the expected utility of choice is that of the preferred alternative in the existing choice set, while the expected utility of choice deferral is the sum of the utility of each possible future choice set weighted by the probability of obtaining it. Whether it is rational to defer choice depends on the probability of To choose or not to choose 6 superior alternatives becoming available over time (i.e., the possible benefits of deferral) and the probability that currently available alternatives will become unavailable over time (i.e., the risk associated with deferral). In these cases, whether or not deferral is the best course of action depends on a careful assessment of the environment and recognition that choosing either too early or too late can yield suboptimal outcomes (Eisenhardt, 1993; Yates & Tschirhart, 2006). According to this application of expected utility, the course of action that should be chosen is the one that maximizes expected utility, whether it be selecting one of the existing alternatives or deferring in hopes of obtaining a better choice set. Extending from this normative perspective to descriptive decision making, two complementary literatures bear on the question of how individuals decide when to choose. One literature considers whether or not individuals appropriately adjust their delay behavior in response to potential benefits and risks associated with delay throughout the decision process. The other literature addresses not judgment and normative models but, rather, non-normative heuristics that promote decision deferral. This latter literature considers characteristics of decision scenarios as well as traits of the individual decision maker that lead to deviations from the standards prescribed by normative models. Each of these literatures is considered in turn. Behavioral adaptivity to benefits and risks of deferral This section addresses how and how well individuals respond to risk-related information at different stages of the decision making process. Surprisingly, there is little research that specifically considers how decision makers modulate their deferral To choose or not to choose 7 behavior in response to anticipated changes in the choice set. For this reason, a discussion is included of how decision makers consider the benefits and risks of obtaining more information about already existing alternatives (e.g., the yearly taxes on a prospective home purchase), where risks can include loss of money associated with getting the information or a decrease in the value of the alternatives over time. Overall, the evidence from these literatures suggests that individuals adaptively adjust their decision making behavior in response to benefits and risks of delay and are discussed presently. Compelling findings from the information search literature suggest that individuals are adept at processing and integrating risk-related task demands when selecting desired information about existing alternatives that vary on multiple dimensions. When faced with opportunity costs, such as a reduction in the payoffs of the alternatives over time, people modulate information search by processing information more selectively. This adaptivity leads to more successful outcomes than would result from a less selective strategy (Payne, Bettman, & Johnson, 1993), though cognitively taxing demands can sometimes limit this success (Payne, Bettman, & Luce, 1996). Moreover, in simpler contexts, it has been shown that individuals will pursue almost any single relevant piece of information when the risk associated with doing so is negligible, but will pursue only instrumental information (i.e., information that determines which alternative will be chosen) when risks associated with this pursuit are introduced (Bastardi & Shafir, 1998; Duncan, Wengrovitz, Sedlovskaya, & Patalano, 2007). These findings suggest that the risks inherent in a To choose or not to choose 8 decision context play important roles in the decision making process, at least at the level of searching for information about available alternatives. In a similar vein, research on sequential search problems provides further evidence that individuals largely and successfully adjust their deferral behavior to the perceived benefits and risks of deferral. In a “secretary problem” (Ferguson, 1989; Freeman, 1983), one is presented with options sequentially and is asked to accept or reject each option. Each option is typically identified only by its rank relative to previously presented options. If the decision maker rejects an option, the next alternative in queue is presented, from which the decision maker is faced with another accept-or-reject decision until an option is selected. In situations such as these, a rational decision maker will consider both the rank of the current option, as well as the likelihood of obtaining a better option in the future. Paralleling the literature on information search, individuals adaptively adjust their behavior to the task, searching a fair number of alternatives to assess a representative range of values and then selecting the next highly desirable alternative that is encountered, though again some deviations have been noted (Ferguson, 1989; Bearden et al., 2005). In sum, individuals seem to well modulate behavior in response to risk information. Additional evidence that individuals are proficient in their overall behavioral sensitivity to risk information comes from a recent work involving a computer-based course selection task (Patalano & Wengrovitz, in press). In that work, individuals were asked to select a hypothetical college course from a set of available courses, each of which varied on five attributes, such as the quality