REVERSALS OF PREFERENCE BETWEEN COMPOUND AND SIMPLE RISKS - THE ROLE OF EDITING HEURISTICS

A reversal of preference between compound and simple risks was demonst rated in the context of compound gambles with loss elements transparen tly in common. The role of predecision editing heuristics in this viol ation of the Invariance Principle was explored in a process-tracing st udy. Verbal reports showed that cancellation by-similarity and amalgam ation heuristics were differentially applied to simple and compound ri sks depending on their similarity structure. It was argued that such h euristics are often useful in simplifying complex choice problems with out loss of important information. However, the inappropriate cancella tion of elements of compound risks can be maladaptive, and can contrib ute to a lack of insight into the true nature of these risks.