What’s in a sample? Epistemic uncertainty and metacognitive awareness in risk taking

• Published in: Cognitive psychology Vol. 149; p. 101642
• Main Authors: Olschewski, Sebastian, Scheibehenne, Benjamin
• Format: Journal Article
• Language: English
• Published: Netherlands Elsevier Inc 01.03.2024
• Subjects: Adaptive behavior; Decisions from experience; Epistemic uncertainty; Metacognition; Numeric cognition; Risk taking; Epistemic uncertainty; Risk taking; Numeric cognition; Decisions from experience; Metacognition; Adaptive behavior
• ISSN: 0010-0285; 1095-5623
• DOI: 10.1016/j.cogpsych.2024.101642

•When learning from experience, cognitive limits cause uncertainty and increase risk.•Two studies show that people have a metacognitive awareness of their imprecision.•Decision makers adapt their risk taking to their own cognitive limitations.•A newly developed Bayesian model can account for the experimental data.•Modeling decisions from experience should take cognitive imprecision into account. In a fundamentally uncertain world, sound information processing is a prerequisite for effective behavior. Given that information processing is subject to inevitable cognitive imprecision, decision makers should adapt to this imprecision and to the resulting epistemic uncertainty when taking risks. We tested this metacognitive ability in two experiments in which participants estimated the expected value of different number distributions from sequential samples and then bet on their own estimation accuracy. Results show that estimates were imprecise, and this imprecision increased with higher distributional standard deviations. Importantly, participants adapted their risk-taking behavior to this imprecision and hence deviated from the predictions of Bayesian models of uncertainty that assume perfect integration of information. To explain these results, we developed a computational model that combines Bayesian updating with a metacognitive awareness of cognitive imprecision in the integration of information. Modeling results were robust to the inclusion of an empirical measure of participants’ perceived variability. In sum, we show that cognitive imprecision is crucial to understanding risk taking in decisions from experience. The results further demonstrate the importance of metacognitive awareness as a cognitive building block for adaptive behavior under (partial) uncertainty.