Chapter 12 and 13: Decision Making

Question 1

In terms of decision making, Costs move a person ___ from a goal and benefits move them ___.

Answer 1

In terms of decision making, Costs move a person AWAY from a goal and benefits move them CLOSER.

Question 2

Utility Maximization

Answer 2

objectively weighing the costs and benefits before making a decision

Question 3

Factors that may influence decision making and prevents our ability to conduct utility maximization?

Answer 3

1) lack of facts or incomplete information
2) biases and beliefs
3) how the problem is framed

Question 4

two ways something could be framed

Answer 4

1) positive frame

2) negative frame

Question 5

If you give people a guarantee, they become ___ ___ in a positive frame

Answer 5

If you give people a guarantee, they become RISK AVERSIVE in a positive frame

Question 6

People become more risk taking in a ___ frame

Answer 6

in a negative frame.

Question 7

In terms of reason based decision making, what is the difference in decision outcomes when given 2 viable options over 3 viable options?

Answer 7

when given 2 viable options, either option is chosen equally

when given 3 viable options, most people choose the option that is the MOST DIFFERENT in order to not need to differentiate between the two similar ones.

Question 8

What is affective forecasting?

Answer 8

before making a decision, we project how we will feel once we make that decision.

Question 9

when affective forcasting, people are pretty accurate about the ___ of the emotion, but we are bad at predicting the ___ of the emotion.

Answer 9

when affective forcasting, people are pretty accurate about the VALENCE of the emotion (ie/ we know we will be sad or happy)

but we are bad at predicting the DURATION of the emotion. (we often think our emotions last longer than they do. We do not feel as sad for as long as we think we would after making the decision).

Question 10

T/F: we tend to put a lot of weight in statistics.

Answer 10

true, even though we didn’t verify the fact.

Question 11

How are statistics affected by positive or negative framing?

Answer 11

Our opinions on the same subject differ dependent on how a statistic is formed, we think more highly of a player that makes 75% of his shots (positive frame) rather than a player that misses 25% of his shots (negative frame), even though its the same statistic.

Question 12

What are illusions of covariation? Why do we do this?

Answer 12

the phenomenon of perceiving a relationship between variables (typically people, events, or behaviors) even when no such relationship exists.

We make predictions and decisions based on how often events occur together. We do this because we DO NOT LIKE RANDOM EVENTS

Question 13

Illusions of covariation may lead to ___ ___

Answer 13

conformation bias. Difficult to dislodge an old way of a belief, and any new material is either thrown out or changed to fit an existing belief.

ex/ we think pitbulls are dangerous, and that any “nice pitbull” is just an outlier

Question 14

What are Heuristics

Answer 14

mental shortcuts that allow us to make quick decisions.

Question 15

Frequency estimate

Answer 15

type of heuristic that assumes that you have all the facts. Objective decision making.

Question 16

Availability estimate. Problems with it?

Answer 16

type of heuristic in which we think about previous experience or available information, but we don’t actually have all the facts.

We tend to go with the decision with the most available info, we think it is statistically backed up because we recited that info with ease.

availability heuristics may make us go with the wrong decisions.

Question 17

Representative Heuristic

Answer 17

our perceived probability ot something happening. People will choose the outcome that most fits our perceived probability.

Question 18

an example of a representative heuristic is the ___ fallacy. How is this influenced?

Answer 18

Gamblers fallacy: we perceive that the probability of winning is high so we choose to keep playing. “i’m due to win,” “i need a break through.”

It is influenced by the law of small samples. The true probability of something happening is shown when tested by many samples, but in small samples, we think we can influence the odds.