The Role of Cognition in Uncertainty Aversion: When Less Thought Leads to More Rational Choices

Human beings often strive to be rational and consistent in their decision making. As a result, a great deal of academic research has been devoted to understanding the decision strategies that promote rational choices across different contexts. Prior work has identified two distinct processing styles used in decision resolution: conscious deliberation, which draws attention to the decision, and intuitive responding, which relies more on “gut” responses. The belief that care fully considering one’s decision should improve decision-outcomes has been advocated for centuries and some academic research supports the merits of such behavior; however, to our knowledge, no work to date has tested the implications that promoting (versus inhibiting) consideration of one’s decision has for one’s likelihood of making rational choices in contexts involving uncertainty. A large body of academic work demonstrates that people prefer certain over uncertain benefits, even showing that a preference for certainty can lead to violations of expected utility theory. The seminal demonstration of such a violation is the Allais Paradox (Allais 1953). This paradox reveals that when individuals are presented with sequential choices between gambles, the majority violates the independence axiom, failing to treat the potential outcomes within the gambles as independent in part because uncertain gains are less tolerable when certain gains are available. We build on this work by testing the effect of processing style on this paradigm. In so doing, we are able to test if and how directing resources (e.g., cognitive focus) towards decisions involving uncertainty affects one’s likelihood of making a rational choice.