Table Of ContentFaculty Working Paper 93-0126
Effects of Knowledge Types on Objective
and Perceived Choice Performance
The I.Ibrar/ of t'lo
MAY
3 1993
University of Illinois
of D'h^nji-rhafnoalon
Eloise Coupey Sunder Narayanan
Department ofBusiness Administration Department ofBusiness Adnrinistration
University ofIllinois University ofIllinois
Bureau of Economic and Business Research
College of Commerce and Business Administration
University of Illinois at Urbana-Champaign
BEBR
FACULTY WORKING PAPER NO. 93-0126
College of Commerce and Business Administration
University of Illinois at Urbana-Champaign
April 1993
Effects of Knowledge Types on Objective
and Perceived Choice Perfornnance
Eloise Coupey
Sunder Narayanan
Department of Business Administration
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EFFECTS OF KNOWLEDGE TYPES ON OBJECTIVE
AND PERCEIVED CHOICE PERFORMANCE
Abstract
Two components ofknowledge used in making choices are examined: alternative-
specific knowledge and choice rule knowledge. The effects ofthese knowledge types,
both singly andjointly, upon objective choice quality and perceived choice quality are
examined in two studies. The results ofStudy One indicate that the knowledge types are
differentially beneficial, and that subjects tend tobe more overconfidentabout theperceived
quality oftheirchoices when they have alternative-specific knowledge than when they have
choice rule knowledge. The hypothesis that this difference is due to subjects' greater
awareness ofalternative-specific knowledge, rather than rule knowledge, is examined and
supported in Study Two.
EFFECTS OF KNOWLEDGE TYPES ON OBJECTIVE
AND PERCEFV^ED CHOICE PERFORMANCE
Eloise Coupey and Sunder Narayanan
University ofIllinois at Urbana-Champaign
Knowledge is a frequent and desirable component ofdecision making for choice.
Knowledge can be used to guide the acquisition and organization ofrelevant information
and aid in the selection ofan appropriate rule for evaluating options for choice. However,
despite much research on decision making for choice, questions still remain. Forexample,
can the knowledge that influences decision making forchoice be classified into different
types? Ifso, are some types more beneficial than others? Are decision makers aware of
different types ofknowledge? Do they recognize that one type may be more useful for
making a choice ofgood quality than another type?
The research described in this paper addresses these questions about knowledge,
building upon pastresearch in decision making and problem solving. In subsequent
sections ofthis paper we present a theory-based rationale for examining two typesof
knowledge that are relevant for making achoice: alternative-specific knowledge, i.e.,
knowledge about the alternatives, and rule knowledge, i.e., knowledge ofa choice rule for
integrating andevaluating information about alternatives. Empirical assessmentsofthese
two knowledge types and their effects on objective and perceived quality ofchoice are
obtained with two studies. The results ofthese studies indicate that the knowledge types
are differentially beneficial, and that subjects tend to be more overconfident when they have
alternative-specific knowledge than when they have rule knowledge.
BACKGROUND
Anderson (1983) described knowledge as consisting ofdeclarative knowledge and
procedural knowledge. Declarative knowledge consists offacts about the items in a
1
problem space, such as the attributes ofthe alternatives in a choice problem, and the values
ofthese attributes for different alternatives. Procedural knowledge reflects the skill
component: knowing how to use the declarative infonnation. The rules typically ascribed
to decision makers forarriving at choices (e.g., elimination-by-aspects (Tversky 1972)) are
examples ofprocedural knowledge. They direct the use ofdeclarative information.
Newell and Simon (1972) describe a similar dichotomy with their distinction
between representation and method for problem solving. The internal representation
reflects the current situation for the decision maker. It is contained in aproblem space,
along with all otherpossible states ofknowledge. The knowledge states are nodes,
connectedby processes. Processes are carried out by the activation ofappropriate
operators. Ifthe internal representation enables the decision makerto selectand apply a
method, such as a choice rule in a choice problem, which, when executed, will achieve a
desired end, the decision maker carries out the method. Ifno method is appropriate the
decision makerchanges the internal representation, adjusting it until a method can be
retrieved and applied.
A
third, similar distinction is made by Chi, Glaser, and Rees (1981) in their study
ofthe developmentofexpertise. They describe expertise as consisting oftwo components:
abody ofusable information and procedural skill. They suggest that what distinguishes
experts from novices in any domain is that experts have the ability to convert knowledgeof
fundamental principles (as in physics problems) into procedures for problem solving. That
is, a largeamount ofalternative-specific information win notautomatically make a decision
makeran expert decision maker. A lotofinformation may be useless unless the decision
maker knows how to evaluate it
The knowledge components described above are necessary forevaluating
alternatives to make achoice. It must be noted, however, that the choice process exists
beyond the stage ofevaluating alternatives. Forexample, considertheprocess model
depicted in Figure 1. The stage ofNeed Recognition may necessitate knowledge about
