CHP 6 - DECISION MAKING Flashcards
List the three approaches to decision making
- Normative
- Descriptive
- Prescriptive
Explain Rational Choice (1)
What are the three questions a rational decision maker asks when making a decision? (3)
Decision making process expected to give optimal results based on risk assessment and person’s values and a”risk preferences”
- What is feasible?
- What is desirable?
- Best alternative based on desirability and feasibility constraints
Rational choice - Human actions results from two filters (2)
What are they?
1) 1st, The “opportunity set” - Physical, economical, legal, psychological constraints
2) 2nd, mechanism that decides which of the “opportunity set” will actually be carried out due to desires, social norms,
Rational Choice:
what is the “opportunity set” in this instance?
1) . Consumer Behaviour
2) Criminal Behavior
1) All of the possible goods and services the consumer can afford to consume! (Everything that you can buy with your assets!)
2) Criminal Behaviour
The choice between risky law breaking behavior and risk-less law abiding Behaviour
(Basically the legal opportunity set)
Rational Choice:
Fill in the blanks -
Actions are valued and chosen, not for themselves, but ____________________
2) what is the exception to this statement?
1) …….but as a more/less efficient means to a further end.
2) exception is behaviour guided by social norm
(the social influence affects the rational choice process heavily!)
What does the Bounded Rationality theory state? (Herbert Simon)
2) what is bounded rationality?
3) what is satisficing? (In terms of the theory)
1) Human behaviour is intendedly rational but only limitedly so
2) Bounded rationality-
It’s difficult to see and consider every POSSIBLE choice because of their ability to process and interpret the information given
3) Satisficing -
It’s the act of identifying when a solution is “good enough”
Although the solution is satisfactory and sufficient, it’s not exactly optimal
The descriptive approach: four ways people make decisions?
1) Framing
2) Medium effect
3) Probability-Assessment Heuristics and Biases (availability and representativeness)
4) anchoring and adjustment
Framing - example? (Don’t really need to memorize but good to know)
What effect does this have to decision making processes?
- A - 200 ppl saved (of 600)
B - 33% that 600 saved or 66% that no one will be saved` - C - 400 die
D - 33% that nobody dies, and 66% that 600 people will die
(Those choices are the exact same situation!)
Framing is a SERIOUS problem for rational choice process - need to be framed properly!
Medium effect
1) What is it
2) two ways they are used?
1) a medium is a conditional reinforcer
- no value in themselves and aren’t motivating unless unless they are paired with actual rewards
2) Used as marketing and employee motivation tools!
Medium effect:
Three relationships in which the medium condition is used? (3)
- Which part do we care about the most? (But why is this not common?)
2 Which relationship do people tend to focus too much on?
- What can mediums lead to?
Effort(E) -> Medium (M) -> Reward (R) (EMR!)
- We care about the reward the most - but the effort to reward relationship is not very typical
- People focus too much on the first relationship - Effort to Medium relationship
- Medium conditions can lead to suboptimal decisions by creating illusions like advantage, certainty, or linearity
Example of thee medium effect? (Don’t really need to memorize but you should probably be aware of it)
Ice cream with task!
*all participants liked vanilla more
Vanilla or pistachio ice cream
Short task - vanilla
Long task - pistachio
^ CONTROL condition
Medium condition:
Vanilla is 60 points
PIstachio is 100 points
Short task. - 60 pts
Long task. - 100 pts
In the medium conditions, more people went with the longer task to get the pistachio ice cream - the medium condition (point system) made the pistachio ice cream seem more desirable and creating an “advantage”
Heuristics and Biases (Tversky and kahneman)
1) What is it?
2) what are the TWO shortcuts?
1) theory that people often use heuristics or judgement shortcuts to make the decision making process simpler rather than going through all steps of the rational decision making model (the two filters, opportunity set, mechanic ask etc)
2)
- Availability Heuristic
- Representative Heuristic
Heuristics and Biases:
Biases with heuristics?
Through two mechanics my that cause bias with heuristics) (2
(Note: heuristics simplify decisions, that’s why they’re so useful)
Relying on them sometimes lead to biases
- Irrelevant external factors interfering with the judgement prices (regency effect, vividness)
- People ignore real vent and useful information or rather, skip through it
Heuristics and biases:
Availability heuristic
1) what is it
2) why is a generally useful heuristic
3) 2 most common biases of availability heuristic
1) If instances of an event is easier to think up, we usually think that it’s more frequent.
2) useful because the more frequent it is or there are more chances of it happening, the recall of that instance will be faster
(DOES NOT WORK THE SAME WAY ROUND)
- Ease of Recall and Retrievability
Representativeness Heuristic
1) what is it?
Two degrees of the heuristic
- Evaluating the probability of an event by two degrees:
- similarity of it’s essential characteristics to it’s “parent” population
- how well it reflects important features from which it was formed (it’s foundation)
