01: Rationality. Shafir, LeBoeuf 2002

Question 1

Rationality in research lit :

Answer 1

Consistency w own views n preferences compatibly w logic n probability

Question 2

Ppl irrationally swayed by

Answer 2

immaterial factors:

• mood
• context
• presentation

Question 3

• Limited rationality necessitated by

- in fact due to

Answer 3

• Limited computational power, attention, memory

- way of making choices

Question 4

hard-easy effect

Answer 4

Estimation of own success probability:

overconfident esp w hard tasks

stimes underconfident w easy tasks

(rarely well-calibrated)

Question 5

Heuristics

Answer 5

usually work

often fail

Question 6

representativeness heuristic

Answer 6

trait attribution by conformity to stereotypes

regardless f probability laws

e.g.:
Left-wing Linda is a bank teller
VS
Left-wing Linda is a bank teller AND a feminist (conjunction)

Question 7

remarkability heuristic

Answer 7

overestimate remarkable evidence w low weight

underestimate unremarkable evidence w high weight

Question 8

Support theory

Answer 8

Probability judgments are made comparing the PERCEIVED strength of THE DESCRIPTION of evidence for this vs alternate hypotheses.

• unpacking description into multiple points sways tw favourable judgment

Question 9

Linear model f t human judge

=

performs…

Answer 9

= linear combination f attributes

…performs better than the modelled human judge!

Question 10

Rational choice

is based on

should be…

Answer 10

…based on subjective utilities of anticipated events, weighted by estimated probabilities.

…should be independent of choice representation n elicitation, but it is not!
> framing effect

Question 11

Individual preferences

are not…

arise…

Answer 11

…well ordered

…arise/are constructed during the choice process

Question 12

Choice
Prospect theory
[Tversky, Kahnemann]

Answer 12

• probability has non linear impact
• gains n losses matter, not wealth!
  > endowment effect
• S shaped function concave for gains (decreasing marginal utility), convex for losses (risk aversion)

Question 13

Gains n losses w same EV, diff variance:

Most ppl prefer…

Though…

Answer 13

…least risky gain, most risky loss!

…even though can be just diff framing.

Question 14

Preference reversal

Answer 14

Decisive attribute is chosen as the most compatible w description.

• eg pricing vs choice:
  ppl prefer lotteries w higher win chance, but price tickets by payoff

Question 15

Evaluability effect

Answer 15

When evaluating items in isolation, as opposed to comparing them, we don’t know what to expect.

E.g. Broad dictionary w torn cover
VS dictionary w good cover but half entries

Question 16

Other misc rationality violations in choice:

Answer 16

• hard choice > search more alternatives (instead of: when curr options are bad)
• anticipated regret
• sunk costs

Question 17

Hedonic utility of events:
past
future

Answer 17

• misremembered (eg overweighting end, extremes as compared to full experience)
• wrongly weighted (e.g. based on focus)
• both: wrongly assessed

Question 18

Emotions, even transient, vs rational choice:

Answer 18

• favour pessimistic estimate of risks: fear/dread/but also good mood
• favour optimistic est. f risks:
  anger
• favours buying insurance: emotional attachment
• suggests frequency: vividness of remembrance
• improves judgment: halo effect

Question 19

Dual process models f thinking =

Answer 19

E.g. Kahneman’s
“Thinking fast n slow”

> theories postulating 2 diff thinking systems:
1- fast, associative
2- based on reasoning rules

Question 20

Irrationalities not eliminated by:

Also not:

Answer 20

• higher motivation
• expertise
• “need 4 cognition” i.e. appreciation of deep thinking (but improves)

Also not

• purely random, or
• trivial