Beware of black swans : taking stock of the description-experience gap in decision under uncertainty

Uncertainty pervades most aspects of life. From selecting a new technology to choosing a career, decision makers often ignore the outcomes of their decisions. In the last decade a new paradigm has emerged in behavioral decision research in which decisions are “experienced” rather than “described”, as in standard decision theory. The dominant finding from studies using the experience-based paradigm is that decisions from experience exhibit "black swan effect", i.e. the tendency to neglect rare events. Under prospect theory, this results in an experience-description gap. We show that several tentative conclusions can be drawn from our interdisciplinary examination of the putative experience-description gap in decision under uncertainty. Several insights are discussed. First, while the major source of under-weighting of rare events may be sampling error, it is argued that a robust experience-description gap remains when these factors are not at play. Second,the residual experience-description gap is not only about experience per se, but also about the way in which information concerning the probability distribution over possible outcomes is learned. Additional econometric and empirical work might be required to fully flech out these tentative conclusions. However, there was a consensus that an initially polemical literature turns out to be constructive in drawing researcher towards greater rapprochements