2. MODELS OF CHOICE: DECISION MAKING AND SOCIAL JUDGMENT UNDER UNCERTAINTY

Question 1

Neumann & Morgenstern (1944, 1947) – book “Theory of Games and Economic Behaviour”:

Answer 1

• Provided a theory of decision making based on the principles of maximizing expected utility
• Optimal economic decisions are grounded on the associated outcome value (not only economic but also personal value)
• Theory became important not only to understand what people should chose (normative/classical theories) but subsequently, what people actually choose (descriptive/modern theories)
• Choices tend to violate the principle of maximizing expected utility and are often not rational

Question 2

Two important limits on the expected utility framework:

Answer 2

• It is incomplete. Many aspects of the decision process lie outside of its analysis
• It does not provide a valid description of the details of human decision-making processes

Question 3

Historically, behavioral research was separate into two areas:

Answer 3

• Judgment - The central empirical questions concerned the processes by which as-yet-obscure events, outcomes, and consequences could be inferred
• Decision making – Theories originally developed by philosophers, mathematicians, and economists to study: How do people choose what action to take to achieve changeable and sometimes conflicting goals in an uncertain world

Question 4

Science of judgment and decision making involves three interrelated forms of research:

Answer 4

1. Analysis of the decisions facing people
2. Description of their natural responses
3. Interventions meant to help them do better

Question 5

Three core elements of decision making:

Answer 5

1. Judgment: How people predict the outcomes that will follow possible choices
2. Preference: How people weigh those outcomes
3. Choice: How people combine judgments and preferences to reach a decision

Question 6

Two potential sources of behavioral heterogeneity:

Answer 6

1. Individual differences

2. Developmental changes across the life span

Question 7

Future issues in JDM (FISCHHOFF & BROOMELL, 2020):

Answer 7

1. Interest in constructed preferences will grow, prompting an increasing use of potentially reactive methods, such as think-aloud protocols
2. Analyzing decision-making tasks will continue to improve understanding of their demands, the conditions for attributions of bias, and opportunities for interventions
3. Research will further disentangle the effects of experimental design on research findings
4. Collaboration with psychologists in other fields will increase understanding of decision making over the life span
5. Demand will increase for the application of decision science to strategic political and institutional decisions, as well as its use to inform repeated decisions
6. Decision science will play an increasing role in helping people to explain the predictions produced by crowds, machine learning, and artificial intelligence

Question 8

Decision: Response in a situation defined in 3 parts

Answer 8

1. There is more than one possible course of action under consideration in the choice set
2. The decision maker can form expectations concerning future events and outcomes following from each course of action. These expectations can be described in terms of beliefs or probabilities
3. The consequences associated with the possible outcomes can be assessed on an evaluative continuum determined by current goals and personal values