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03/05/2010

Research Overview: Cornelia Betsch's Preference for Intuition or Deliberation Scale


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Recent work by Cornelia Betsch (Center for Empirical Research in Economics and Behavioral Sciences—CEREB, University of Erfurt, Nordhaeuser Strasse 63, D-99089, Erfurt, Germany) suggests some interesting findings regarding strategies used to make a choice. Several key points of this research are as follows.

There are two ways to reach a decision—summarized as follows:

  • The intuitive approach is based upon implicit knowledge. Specifically, knowledge that has been stored in long-term memory which was acquired by associative learning is tapped to produce an output that is a “feeling.” This feeling is used as the basis for judgments and decisions. (paraphrasing T. Betsch)
  • The deliberative approach is an analytic mode that reflectively processes mainly cognitive contents such as beliefs, arguments, and reasons. It is the counterpoint to the intuitive approach.

Individuals have a pre-disposition to make decisions in one of these two ways. An assessment test called the Preference for Intuition or Deliberation Scale, or PID, (C. Betsch, 2004) has been developed to indicate which decision-making approach an individual is most comfortable using.

Observations regarding the findings are that:

  • People can use either method depending on the circumstances and implications of the decision.
  • Intuitive people make faster decisions—and choose that decision style across all scenarios more frequently than deliberation.
  • In tests using the PID scale, intuition was found to correlate with extraversion, and agreeableness.
  • In tests using the PID scale, deliberation was found to correlate with conscientiousness, perfectionism, and the need for structure.
  • When people have to be spontaneous (i.e. time is short), implicit attitude predicts their behavior. However, without time pressure, the explicit attitude is a better predictor of behavior.
  • Intuitive and deliberative people base their choices on different sources of knowledge: implicit attitude for intuitives versus explicit attitudes for deliberatives.
  • Intuitive decision-makers are strongly influenced by emotion (affect)—and listen to them more.
  • A person’s risk attitude is assessed by estimating the utility function (i.e. allocation of value per unit of money). A risk neutral attitude is expressed by a linear utility function but when emotion (affect) is used in the decision, this utility function becomes curved. Thus, a more linear function indicates deliberate and thoughtful evaluation. (Recall the Kahneman and Tversky Prospect Theory—the pleasure of gains has a different effect than the pain of loss. Thus, the function is not linear.)
  • People assign a greater value to the positive consequences of their decision when their preferred strategy for the decision is used. Conversely, in situations of regret, there was less regret when their preferred decision strategy was used.
  • Changes to implicit knowledge occur only following numerous learning experiences. (Thus, while intuitives make decisions more quickly, they are more prone to errors resulting from slow change processes in the environment.)

Ways to directly apply this theory are as follows:

  • Use the PID to classify your clients in terms of their preference for decision-making.
  • When seeking a decision from a client, orchestrate the presentation and information materials in a way that appeals to their preferred decision style (emotional content for intuitive; graphs, charts and logic for deliberatives).
  • In matters of great financial consequence, attempt to encourage a deliberative decision-making process but be patient with the intuitive who will have a harder time getting there.
  • Expect to spend a great deal of time re-educating intuitives’ to influence their decision-making ability. (Implicit learning takes more instances of presentation and generation of emotional reactions.)

--Mark Harbour, President, the Applied Behavioral Finance Group (ABFG)

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