UTILITY MAXIMIZATION AND MELIORATION - INTERNALITIES IN INDIVIDUAL CHOICE

How do people go about choosing between alternatives in relatively sim ple settings? This study explores some of the variables that past work suggests may be relevant. Volunteer subjects worked for money in six procedures in which the probability of a payment from either of two al ternatives was 1.0, but the rate of pay (i.e. the speed with which a p ayment was delivered or the size of the payment) interacted with the s ubjects' recent allocation of choices, which we define as the 'interna lities'. Because of the internalities, choosing the currently more pro fitable alternative did not maximize total earnings. Subjects were mor e likely to fail to maximize when the interaction between present pay and past choices was spread over longer sequences of choices, or when the reward variable was the speed, rather than the value, of each paym ent. Subjects often disregarded the internalities and were instead gui ded by the current yields of the two alternatives, which is a frequent ly observed tendency, called 'melioration', in experiments on choices by animals. The tendency toward melioration was only partially counter acted by explicit instructions on how to maximize earnings. We discuss a theoretical framework for melioration that postulates both motivati onal and cognitive sources.