DECISION MAKING INVOLVING SEQUENTIAL EVENTS: SOME EFFECTS OF DISAGGREGATED DATA AND DISPOSITIONS TOWARD RISK*

This paper concerns human processing of disaggregated data in a business decision setting involving sequential events. Subjects currently employed in trust banking institutions chose between two mutually exclusive alternatives in a series of decision trials. The outcome for each alternative was the result of a two-stage process; an unsuccessful outcome resulted from failure at either the first or second stage. The probabilities of success at each stage and the overall (joint) probability of success were provided for each alternative. Participants showed strongest preferences for an optimal (expected-value) strategy in processing the data; however, significant preferences for two suboptimal strategies also were observed. Preferences for suboptimal strategies were influenced by the magnitude of differences in the alternatives' joint probabilities of success, by the magnitude of differences in the alternatives' stage probabilities of success, and by subjects' dispositions toward risk.