Collaborative Research: The Impact of Advice on Decision Making

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The PI team's past research on decision making under the influence of advice has led to a body of experimental results that indicate that word-of-mouth advice is a very powerful force in shaping the decisions that people make and tends to push those decisions in the direction of the predictions of the rational theory. More precisely, their previous research has indicated that: 1) Laboratory subjects tend to follow the advice of naive advisors, i.e. advisors that are hardly any more expert in the task they are engaged in than they are. 2) This advice changes their behavior in the sense that subjects who play games or make decisions with naive advice play differently than those who play identical games without such advice. 3) The decisions made in games played with naive advice are closer to the predictions of economic theory than those made without it. 4) If given a choice between getting advice or the information upon which that advice was based, subjects tend to opt for the advice indicating a kind of under-confidence in their decision making abilities that is counter to the usual ego-centric bias or overconfidence observed by psychologists. 5) The reason why advice increases efficiency or rationality is that the process of giving and or receiving advice forces a decision maker to think about the problem they are facing in a way different from the way they would do so if no advice were offered. This research project will continue experimental research on the role of advice giving and receiving in a variety of economic environments with strategic and state uncertainty. There are three main foci of the research, each with a distinct experimental program. These are (i) the role of advice in individual decision-making, (ii) the role of advice in learning transfer, and (iii) the role of advice in intra-generational convention formation. The goal is to investigate the role that advice can play in improving by incorporating some of the elements of the previous research on individual decision-making , We will compare the play of subjects who receive advice from "experts" who have played the game previously with the play of subjects who are only able to view the history of play of the experts. We will also manipulate the amount of experience the advice giver has, e.g., as little as one period of experience or as much as 100 periods of experience. Previous and ongoing research on learning transfer -referring to the process whereby experience in one environment helps one to understand how to behave in another environment-has been concerned mainly with the question of how and whether individuals are able to learn some general principles that apply in related strategic situations. In general, learning transfer does not seem to be very strong. Individuals have trouble carrying over general game-theoretic principles from one environment to another, even if the specific application of the principle in one environment appears to be understood. As so much of the previous research has shown that the presence of advice in strategic situations tends to be rationality-enhancing, we will investigate the role that advice plays in improving learning transfer. The PIs have studied inter-generational (or vertical) advice giving and receiving in many different games, but another dimension of interaction that figures prominently in theories of social and cultural evolution is the intra-generational (or horizontal) dimension, in which members of the same generation interact with and influence one another, and it seems natural to ask what the role of advice giving and receiving might be here as well. The PIs will study this dimension of advice-giving and receiving in order to quantify, for example, the relationship between the strength of a convention of behavior within a generation to the continuation probability of that convention over subsequent generations of players.