Pantelis Analytis, Assistant Professor at the Danish Institute of Advanced Studies (DIAS) at the University of Southern Denmark (SDU), will give a talk in the SWE Colloquium series on Thursday, 18 April.

Make-or-break: Chasing risky goals or settling for safe rewards?

Humans regularly pursue activities characterized by dramatic success or failure outcomes where, critically, the chances of success depend on the time invested working towards it. How should people allocate time between such make-or-break challenges and safe alternatives, where rewards are more predictable (e.g., linear) functions of performance? We present a formal framework for studying time allocation between these two types of activities, and explore optimal behavior in both one-shot and dynamic versions of the problem. In the one-shot version, we illustrate striking discontinuities in the optimal time allocation policy as we gradually change the parameters of the decision-making problem. In the dynamic version, we formulate the optimal strategy—defined by a giving-up threshold—which adaptively dictates when people should stop pursuing the make-or-break goal. We then show that this strategy is computationally inaccessible for humans, and explore boundedly rational alternatives. We compare the performance of the optimal model against i) a myopic giving-up threshold that is easier to compute, and even simpler heuristic strategies that either ii) only decide whether or not to start pursuing the goal and never give up or iii) consider giving up at a fixed number of control points. Comparing strategies across environments we investigate the cost and behavioral implications of sidestepping the computational burden of full rationality.