A Dual-process Model of Decision-making: The Symmetric Effect of Intuitive and Cognitive Judgments on Optimal Budget Allocation

Understanding the influence of a dual-processing system on budget waste resulting from choice inconsistencies is critical in helping individuals maximize decision utility. In 2 studies, we rely on the generalized axiom of revealed preferences to explore the severity of choice inconsistencies resulting from intuitive and cognitive judgments separately, as well as overall severity across the 2 types of judgments. We focus on choice inconsistency that leads to the inefficient use of individuals' budget and not on the simple preference divergence that may result from the 2 types of judgments. We find that budget waste resulting from intuitive and cognitive judgments is comparable but that overall budget waste across the 2 types of judgments is significantly higher. These findings suggest that the inconsistency in choices resulting from intuitive versus cognitive judgments is responsible for significant loss of decision utility in individuals' economic decisions, rather than choice inconsistencies resulting from a specific type of evaluation in itself. We discuss theoretical and practical implications of our findings.