A Resource-Rational Process-Level Account of Violation of Stochastic Dominance
Dominance is widely considered a pillar of rational choice and has played a major role in the history of theorizing and developing models of human decision-making. A wealth of empirical evidence reveals that humans’ violation of dominance is both substantial and systematic. But could violation of dominance be given a rational basis? Specifically, could it be understood in terms of the optimal use of limited cognitive resources? In this work, we present the first resource-rational account of stochastic dominance, the most empirically studied version of dominance. Concretely, we show that a resource-rational process model, sample-based expected utility (SbEU), provides a unified account of a broad range of empirical results on violation of stochastic dominance. We discuss the implications of our work for risky decision-making, and more broadly, human rationality.