Considering the Role of Experience in the Formation of Behavioral Biases from a Developmental, Cross-Cultural, and Evolutionary Perspective

Abstract

Humans make countless choices every day that affect their health, safety, and finances. Despite the high stakes, decision-making is often irrational from the viewpoint of traditional economics, i.e., the choices made are contrary to existing preferences. This leads to negative consequences for individuals and to inefficiencies in the exchange of goods. The fields of behavioral and experimental economics have made great strides in understanding these sub-optimal patterns of behavior, but we still cannot always predict human decisions. In this paper, we present developmental, cross-cultural, and comparative findings for three irrational tendencies (framing effects, the endowment effect, and inequity aversion) to illustrate two different patterns that experience can play in their formation. This analysis allows us to consider why these tendencies have emerged, what benefits they may bring to the decision-maker, and to propose types of interventions that may combat these tendencies. Throughout, we suggest where this approach of combining comparative and developmental work can address theoretical debates and practical questions within the field of behavioral economics.

Keywords

• Decision making
• Behavioral biases
• Cognitive and perceptual development
• Evolutionary theory
• Information
• Knowledge and uncertainty