Ch. 15 part 2 Flashcards
The mistake of allowing their preferences for outcomes to affect assessments of their likelihood.
Wishful thinking
A measure of the logical relationship between a set of evidence and a conclusion.
Logical probabilities
the options available in a decision situation.
Alternatives
Preferences among alternatives are complicated by such influences as…
Anticipated regret, the endowment effect, and loss aversion
Assess the merits of those outcomes.
Evaluative judgments
A measure of an individual’s degree of belief in a proposition. Applicable to any outcome concerning which someone might venture an opinion.
Subjective Probabilities
Select an alternative that is good enough for current purposes.
Satisfice
Uncertainties affecting the outcomes of a choice.
Chance nodes
Influence whether an option is seen as acceptable or not.
Reference point
The eventual results or consequences of a decision.
Outcomes
What are 5 activities that are essential to effective decision making?
Think, decompose, simplify, specify, and rethink.
The task of assessing alternatives according to certain criteria is a common functional demand in problem solving.
Evaluation
Is a judgmental activity in which relevant factors are mentally weighed and combined to reach a conclusion.
Decision Making
Identified many ways in which individual decision makers violated decision theoretic norms of rationality.
Behavioral decision theory and behavioral economics
An evaluation method developed by economists is often employed in practical affairs.
Cost-benefit analysis
A measure of observed relative frequency or the known composition of a population.
Frequentist probabilities
Is a logical, formal, and highly prescriptive approach to decision making.
Classical decision theory
Reliable objective probabilities can be attached to the chance nodes of a decision tree.
Decision making under risk
It assumes that people know a great deal about the situation they’re in and instructs them to choose the alternative that maximizes their preferences.
Classical decision theory
Expressed preferences are often constructed on-the-fly, being shaped by the particular past experience one recalls, visceral good-bad emotional reactions to alternatives.
The mere exposure effect
People don’t have the mental capacity to handle the world’s complexity.
Bounded rationality
Unwilling to cut their losses, people persist in courses of action that are unlikely to succeed.
Escalation of commitment
Subjective probabilities are used to quantify chance nodes.
Decision making under uncertainty
Decision situations in which there is a sure thing alternative that is better than the worst outcome of risky alternative, but not as good as the best outcome of that alternative.
Basic decision dilemma
