Decision making Flashcards
What is the Just Noticeable difference
The smallest quantity of difference that can be noticeable
What was Weber-Fechners Findings about the JND
The size of the JND is a constants ratio of the reference stimulus, people are more sensitivei to prpoportional difference than absolute differences
The three relevant heuristics in decision making
Availiability, Representativeness, Affect
What is the Availability Heuristic
Determines that the ease of retrieval from memory is the basis for juding frequency, the fact that you can easily remember one thing influences your decisions/ judgements on the actual frequency of that thing
What is the supporting research for the avbialiability heuristic
Researched the relationship among 3 factors-
Freqneucy of reported deaths in newspapers, peoples estimates of frequency of those types of deaths (usually murders/ car crashes) and actual mortality rates and causes
Found that peoples estimates of higher death rates correspond with how often newspapers reports these types of deaths
What is the representativeness Heuristic
The probability that object A belongs to class B is related to how much A is represntative of B
Supporting research for the representativeness Heuristic
Kahneman and Tversky, ppts given the base rate probability and a decription of a member in the population, asked the probability that the person is an engineer.
Found that people don’t care about base rates and instead use representativeness to make judgements about probability of A belonging to B
What is the Affect heuristic
When people make judgements based on their gut feeling or intuition
What is Anchoring
When people make numerical estimates by using a reference as a starting point and tend to base their judgements around the reference number (Is the river longer than 10 miles?)
Sunk-Cost Falllacy
When you’ve already invested a lot of time/money into doing/ creating something, you’re more likely to keep going with it in hopes of not letting that investments go to waste
What does the “utility’ in the expected utility theory mean
The overall value of the outcome of the decision for the decision maker (hapinness, money etc.)
What is the expected utility theory
People make decisions that masimise utility, given available information
Called the rational model fo decision making
What is Prospect theory
The idea that, depending on the outcomes in relation to the reference point, gains and losses are represented differently in the mind.
Risk Aversion
The idea that losses are more bad than gains are good, the risk of loss is worse than it’s equal chance of gain
The Gain vs loss frame
Gains tend to shift the reference point downwards
when frameds as gains people seek certainty
Framed as losses, people seek risks or have a higher risk tolerance
