Fuzzy-Trace Theory

Fuzzy-Trace Theory

Editor(s)

Alan Lewis

Description

In psychology and economics, scholars are increasingly combining behavioral and neuroscientific techniques to understand judgment and decision-making. In the following, we describe a major framework that takes this approach: fuzzy-trace theory. Fuzzy-trace theory (FTT) is a theory of judgment, decision-making, and memory and their development across the lifespan. To begin, we define some basic conceptual components of judgment and decision-making that explain economic behavior, including perceptions of probabilities and outcomes (i.e., payoffs or rewards). In this connection, we also briefly describe the evolution of ideas in behavioral economics and neuroeconomics from the perspective of FTT. We then focus on risk preferences and risky decisions, reviewing the theory's explanations for such phenomena as (a) risky choice framing effects (that risk preferences shift depending on whether choices are described as gains or losses); (b) variations on framing effects (e.g., what are called "truncation" effects because pieces of information are systematically deleted from gambles to test alternative theories); (c) time preferences and delay gratification, including truncation effects also known as hidden-zero effects; and (d) individual and developmental differences among people, such as differences in age and expertise, sensation seeking (the desire for thrills or excitement usually associated with rewards), and numeracy (the ability to understand and use numbers). In each of these sections, we describe both behavioral and brain evidence that illuminates economic behavior. We conclude by summarizing the main tenets of FTT, how it differs from such approaches as prospect theory, and future directions for research on judgments, decisions, and neuroeconomics.

Title of Book

The Cambridge Handbook of Psychology and Economic Behaviour

ISBN

9781316676349

Publication Date

2018

Document Type

Book Chapter

Publisher

Cambridge University Press

Keywords

fuzzy-trace theory (FTT), decision-making, economic behavior

Disciplines

Cognition and Perception | Cognitive Psychology

Fuzzy-Trace Theory


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