Despite being equipped with information, people make wrong decisions

While psychologists have long studied the question of how humans make decisions, this is one of the first studies to examine how people evaluate "what could have been" when they repeatedly make the same decision that affects their future state.

When faced with a choice that may yield short-term satisfaction, or long-term benefit, people who are fully informed about the options generally go for the short-term reward, according to new research from the University of Texas.

The findings found in the online journal Judgment and Decision Making may help in understanding decisions that people make in all subjects, starting with correct eating habits and exercising, to buying more environmentally friendly products.

"You would expect that when a person has more information about the options, they will make a better decision. Our research revealed exactly the opposite," says Professor Bradley Loeb, who carried out the research together with PhD student Ross Otto. "In order to fully evaluate options in the long term, you need to repeatedly make the decision and start feeling the benefits."

During the study, 78 subjects were asked to repeatedly make a decision in a computer program that allowed them to choose between two options and accumulate points. Each time the subject was given a situation with more points. The second option always made it possible to win more points later in the experiment.

A small monetary reward was given to subjects as an incentive for accumulating points during the initial 250 test questions.

Despite this, the subjects who were given full information regarding the points they had to sacrifice in the short term, in order to gain a greater number of points in the long term, chose the option of the short term reward twice as often.

In a real-life analogy, a student who stays home to study, and finds out he lost a fun party, will likely not stay home the next time he is faced with a similar scenario.

"Fundamentally, people should avoid thinking about benefit and loss in the short term, otherwise they will invest, and as a result end up in a worse situation," says Loeb.

While psychologists have long studied the question of how humans make decisions, this is one of the first studies that examines how people evaluate "what could have been" when they repeatedly make the same decision that affects their future state.

Loeb says he believes that beneficial long-term decisions can be coerced by tangible rewards, such as good grades, and a raise or promotion, which may serve as markers of long-term success and can help overcome short-term tendencies.

"If there was no conflict in our elections, this could be a problem. But in everything there is a conflict between short-term and long-term goals," says Loeb. "It is very difficult for the decision-making system to resolve [prejudices] regarding what is good in the short term and the long term."

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