chapter 13: decision making Flashcards
what are the three categories of biases that are caused by using heuristics
- biases that affect how we interpret info
- biases that affect how we judge frequency
- biases that affect how we make predictions
define representative heuristic
tend to make inferences on the basis that small samples resemble the larger population they were drawn from
representative heuristic results in 2 biases. what are they?
- base-rate neglect
- conjunction fallacy
what is the base-rate fallacy
people ignore the underlying probability of an event in favor of some present evidence
define conjunction fallacy
false belief that the conjunction of two conditions is more likely than either single condition
what is the bias “regression toward the mean”
when a process is somewhat random, extreme values will be closer to the mean when measured a second time
what is the expected utility hypothesis (EUT)
when people are faced with multiple options, they will choose the one that returns the highest likely value
define neuroeconomics
combination of economic theory, psychology and neuroscience to understand decision making
reasoning is defined as the process of …
drawing new conclusions from a given set of info
what is the naem of the process of choosing a specific course of behavioral actions from among many possibilities
decision making…
name and differentiate the two basic classes of reasoning
deduction: top-down
induction: bottom-up
which word refers to statements that can be true or false and can refer to properties of external world
propositions
what are syllogism
kind of reasoning in which a conclusion is derived from two or more propositional statements
name 2 types of syllogism
- categorical syllogism: 2 premises, 1 conclusion
- conditional syllogism: relates 2 propositions
define belief bias
tendency to rate conclusions that are more believable as more valid
what causes the belief bias
- cognitive shortcuts
- atmosphere effect
explain Phillip Johnson-Laird’s theory where people construct mental models
if syllogism involved concrete concepts
→ visualization of sentences
→ mental exploration to see whether model breaks down
in the conditional syllogism, what are the two valid deductions we can make
- affirming the antecedent
- denying the consequent
name the invalid deductions that can be made from the conditional syllogism
- affirming the consequent
- denying the antecedent
if we think about Wason’s card task, what is the key to testing a rule to see if it is true or not
check cases that have the potential to prove it wrong or falsify it
what is the confirmation bias
tendency to find supporting evidence for a hypothesis or belief
why did Wason’s card task result in such low performance
people perform more effectively when dealing with concrete, real-world examples
name the different types of inductive reasoning
- generalization
- statistical syllogism: observation about a group to inference about individual
- argument from analogy: 2 things share properties = must share diff properties as well
define one-shot learning
concept is learned from a single example
according to Kahneman, what were the two different reasoning systems
- “slow” system: serial, logical analysis of info
- “fast” system: heuristic shortcuts, pattern matching
what is an availability heuristic
tendency to rely on info that quickly comes to mind when trying to make a decision
what is the affect heuristic
tendency for people to overestimate the risk of events that generate a strong emotional reaction
explain the heuristic called anchoring
tendency for people to focus and rely on initial pieces of information
what kind of people are more susceptible to the anchoring heuristic
people more prone to trusting others
what is the representativeness heuristic
tendency for people to rely on the fact that a person or object they are trying to make a decision about conforms to a specific category while neglecting other types of info/reasoning
define cultural cognition
tendency to hold beliefs about risk that are consistent with their broader social and moral values
define loss aversion
prefer to avoid losing something as compared with not gaining something of equal value
define endowment effect
people place higher value on objects they already own over those that they don’t yet own
what is the Ikea effect
tendency for people to value items that they themselves created or built compared with items they bought or were given
define the status quo bias
tendency to leave things as they currently are, rather than making a change
how does framing affect decision making
people tend to favor options that are presented in a positive, rather than negative fashion
- affects perception too
what are the two types of emotional factors in decision making
integral emotions: directly related to decision
incidental emotions: state of person at the time of decision
in the sell and choice experiment, what could be observed in people that were in a negative mood
more motivated to change smt
- wanna sell to get rid of object or wanna buy it if don’t already have it
explain the experimental paradigm called the Ultimate Game
2 strangers with opportunity to split money
- responder willing to reject offer if too unfair
- role of strong emotions in decision making
what region in the prefrontal cortex plays a significant role in decision making
ventromedial prefrontal cortex
what happens when there is bilateral lesion of the vmPFC
decision-making myopia
- doesn’t take long-term outcomes into account
- capable of reasoning appropriate beh but can’t select those beh when faced with decision
what exactly is the role of the vmPFC
associates emotional reaction with beh
- when damaged, circuit broken so predictive emotional responses are stunted = riskier, more rash beh
describe the findings from the Stanford Marshmallow Experiment
- ability to cope with frustration and stress positively correlated with ability to wait for marshmallow
- prefrontal cortex more highly activated
- ability to delay gratification is mix of neurological and environmental factors
what is the nudge theory
strategy where businesses, etc try to encourage people to make certain beh choices by introducing small changes to env
give an example of the nudge theory
- opt-out instead of opt-in
- surcharge for plastic bag instead of discount for bringing reusable
what is the gambler’s fallacy
false belief that a predicted outcome of an independent event depends on past outcomes
what is the hot-hand belief
thinking that a person who experiences success will keep having success
differentiate between the post-mortem and pre-mortem techniques
post: learning from failures
pre: anticipate and prevent mistakes before they result in catastrophe
why do we describe people as being bounded rational?
people have both environmental and individual constraints
- reason why we use heuristics
people are considered satisficers because..
they look for solutions that are “good enough”
explain Gigerenzer’s alternative view called “ecological rationality”
views heuristics not as a “good enough” approach to solving a problem but as the optimal approach
Which of the following is NOT TRUE about heuristics and biases?
a. the conjunction fallacy arises because people use the availability heuristic
b. regression towards the mean only happens when there is not a perfect correlation
c. heuristics sometimes can give the right answer
d. people use heuristics because we are boundedly rational
a. the conjunction fallacy arises because people use the availability heuristic
differentiate between perceptual decision making and value-based decision making
perceptual: objective criterion for making your choice (externally defined)
value-based: subjective criterion for making your choice (internally defined)
define risk premium
difference between expected gains of a risky option and a certain option
name and explain the 3 risk attitude profiles
risk averse: decision maker has positive risk premium
risk neutral: decision maker has zero risk premium
risk seeking: decision maker has negative risk premium
according to the framing effect, in which condition would people be risk-averse and risk-seeking
risk-averse: when options are described as gains
- they prefer the sure thing and go for safety
risk-seeking: when options are described as losses
- they can tolerate an uncertain thing and risk a loss
what is the prospect theory
- utility: subjective value assigned to an object
- probability weighting: probability not treated objectively
if we say that choices are influenced by your affect (emotional response), which brain region would show increased activity during decision making
amygdala
what is the prediction error
difference between what you predicted would happen and what actually happened
- positive or negative
which of the following statements about prospect theory is false?
a. it tells us how people do act instead of how they should act
b. the asymmetry of the utility function is made to account for the framing effect
c. people tend to overestimate the probability of rare events and underestimate the probability of common events
d. utility is an immutable property and is reference independent
d. utility is an immutable property and is reference independent
if someone went to a park everyday and saw dogs wearing top-hats. they conclude that all dogs that visit this park wear top-hats. this is an example of ___ reasoning because you are reasoning ___ information.
a. inductive or deductive
b. from or towards
inductive
from
what are illusory correlations
linking two co-occurring events and assuming a relationship
how does the prediction bias differ in people with depression and severe depression
- mild depression: no bias
- severe depression: pessimistic bias
how does the availability heuristic bias our judgements?
a. it makes judgments more accurate when information is available
b. we confuse the frequency of what we can remember with actual occurrences
c. it facilitates ambiguous decisions
d. we always recall things more easily when they occur frequently
b. we confuse the frequency of what we can remember with actual occurrences
