Failures of Contingent Thinking

We present a behavioral definition of an agent's perceived implication that uniquely identifies a subjective state-space representing her view of a decision problem, and which may differ from the modeler's. By examining belief updating within this model, we formalize the recent empirical consensus that reducing uncertainty improves contingent thinking, and propose a novel form of updating corresponding to the agent 'realizing' a flaw in her own thinking. Finally, we clarify the sense in which contingent thinking makes state-bystate dominance more cognitively demanding than obvious dominance.