The Frontal Cortex

I found this minor anecdote, from Peter Baker's authoritative NY Times article on Obama's decision-making process for Afghanistan, to be quite fascinating:

On Oct. 9, Mr. Obama and his team reviewed General McChrystal's troop proposals for the first time. Some in the White House were surprised by the numbers, assuming there would be a middle ground between 10,000 and 40,000.

"Why wasn't there a 25 number?" one senior administration official asked in an interview. He then answered his own question: "It would have been too tempting."

General McChrystal, it turns out, is a shrewd student of decision-making. He realized that the introduction of a compromise option - say, a troop buildup of 25,000 soldiers - would have been irrationally attractive. This is known as the compromise effect, and it was first documented by Amos Tversky and Itamar Simonson.

Here's an example of the compromise bias in action: A group of sixty undergraduates received descriptions and pictures of microwave ovens taken from an actual catalog. They were asked to choose between an Emerson oven priced at $110 and a Panasonic priced at $180, which had a few more features. Both items were on sale, a third off the regular price. In this scenario, 57 percent of subjects chose the Emerson and 43 percent chose the Panasonic.

Now let's consider a second scenario, faced by another group of undergraduates. They were presented with the same two microwave options, but given a third choice as well: a $200 Panasonic oven at a 10 percent discount. Of course, this Panasonic oven is a clearly inferior choice, since it comes with a much smaller discount; it's mere presence in the catalog shouldn't influence our decision. Nevertheless, the introduction of this new alternative dramatically increased the attractiveness of the other Panasonic oven, so that 60 percent of subjects new chose it.

Retail stores have long manipulated this bias, as they constantly present consumers with deliberately mediocre and expensive options, just so other options seem more reasonable. (The easiest way to make a $50 T-shirt seem like a good deal is to surround it with $100 T-shirts.) When it comes to decision-making, context is everything.

The point is that most of us are natural compromisers, eager to find a middle-way. (There's some suggestive evidence that the tendency to pursue the compromise option is mediated by culture, with East Asians more likely than Westerners to show the compromise effect.) Furthermore, our compromising tendencies can be skewed by the audience: when American subjects were told that they might have to defend their choice in front of a whole classroom, they shifted towards the safety of the middle option. Obama, of course, needed to justify his decision to an entire planet.