Cognition: Decision making Flashcards
Define decision making
The cognitive processes of choosing between alternative possible actions
Distinguish between the normative and descriptive approach to decision making
The normative approach is the search for good ways to make decisions while the descriptive approach is trying to understand what decisions people make as opposed to what decision they should make.
Differentiate between risk and riskless decisions
In decisions with risk there may be a negative outcome to one decision while in riskless decisions the outcomes of the choices are known with certainty.
Name two different types of decisions (ways to distinguish them)
Single attribute (one difference between them) and multi attribute (Multi functional phones.)
What is meant by the expected value of a decision
The long term average value of a repeated decision which is determined by the probability and size of the outcome.
What minimum betting reward was found that people would accept if a coin was flipped and a loss would result in a $10 loss? What does this show?
$30, This shows people generally don’t follow the expected value approach in real life.
What is meant by risk aversion and risk seeking?
Risk aversion means avoiding risky choices even when the expected value is higher for the riskier choice. Risk seeking means taking risky choices even when riskless choices of higher value are available.
What is meant by utility?
The subjective value of an option
What do people usually use to ‘calculate’ probability instead of the expected value approach
subjective probability, how likely a person believes an outcome to be irrespective of the objective probability.
What is meant by prospect theory?
A decision theory stressing relative thoughts and gains
What did Kahneman and Tversky propose monetary gambling decisions were based on?
Gains and losses relative to ones current wealth
What is meant by loss aversion?
There is a greater dislike of loss utility than liking for gaining the same degree of utility. (prospect theory)
What is the endowment effect?
When people over value an item they own, require more money to sell it than they would’ve bought it for
Name and explain another bias in decision making
Status quo bias is the tendency to prefer the current state of affairs.
What did Kahneman and Tversky’s experiment on framing potential losses against potential gains consist of?
Participants were either proposed problem 1 or problem 2;
Problem 1: asian disease comes endangering 600 people. Either 200 people are saved or 1/3 chance of everyone saved or 2/3 probability of no one saved
Problem 2: Either 400 people die or 1/3 chance of no one dying or 2/3 chance of everyone dying.
What were the results of Kahneman and Tversky’s experiment?
In problem 1 72% of people chose 200 people definitely living whether in problem 2 78% of people took the risk. This shows that people in problem 1 were working with a gains framework and chose risk aversion while in problem 2 they were working with a loss framework and were risk seeking.
Name and explain two probability heuristics as proposed by Kahneman and Tversky apart from the affect heuristic.What
Availability heuristic (judging frequency or probability of events by how easy it is to bring the events to mind) and representativeness heuristic (by how representative or typical it is of its category.)
What is meant by the conjunction fallacy?
The mistaken belief that the conjunction of two events (A and B) is more likely than either one of A or B.
What were the results of the experiment on the conjunction fallacy?
People were more likely to denote lida a banker and feminist than either one on its own.
In future experiments what changed these results?
Stating them in terms of frequencies (how many of 100 people….)
What is meant by the base rate?
The overall probability of the event in a population
What can help people solve base rate problems?
Expressing them as frequencies
Why is it thought its easier to solve these problems with frequencies?
They are developmentally and evolutionary prior to percentages and probabilities.
What did Heath et al.’s survey suggest about availability bias?
It goes away once we are aware of it
