Over-representation of Extreme Events in Decision-Making: A Rational Metacognitive Account

The Availability bias, manifested in the over-representation of extreme eventualities in decision-making, is a well-known cognitive bias, and is generally taken as evidence of human irrationality. In this work, we present the first rational, metacognitive account of the Availability bias, formally articulated at Marr's algorithmic level of analysis. Concretely, we present a normative, metacognitive model of how a cognitive system should over-represent extreme eventualities, depending on the amount of time available at its disposal for decision-making. Our model also accounts for two well-known framing effects in human decision-making under risk---the fourfold pattern of risk preferences in outcome probability (Tversky & Kahneman, 1992) and in outcome magnitude (Markovitz, 1952)---thereby providing the first metacognitively-rational basis for those effects. Empirical evidence, furthermore, confirms an important prediction of our model. Surprisingly, our model is unimaginably robust with respect to its focal parameter. We discuss the implications of our work for studies on human decision-making, and conclude by presenting a counterintuitive prediction of our model, which, if confirmed, would have intriguing implications for human decision-making under risk. To our knowledge, our model is the first metacognitive, resource-rational process model of cognitive biases in decision-making.