decision making Flashcards
Simple decisions
Little risk
No difference in benefit
Complex decisions
Harder to weigh up
More uncertainty
Little information to help guide you
Reducing uncertainty
Minimise risk
Maximise benefit
Identification stage
Identify the need for a decision to be made
Innate process
The decision will be framed in regards to the costs and benefits in this stage
The way the decision is framed can change the outcome of the decision
Generation stage
We look at all the different alternative choices we have and identify them
We may not have energy to choose between the alternate choices
Judgement stage
Look at all the choices, costs, losses, benefits
See if the comparisons are straightforward and what strategies we should employ
Summary of decision making procedure steps
Need for decision is realised
Alternatives identified
Evaluated and come up with final decision
How to calculate probability
Probability of an impossible event is 0
Probability of a sure event is 1
All probability ranges between 0 and 1
Overestimating probability
If prior experience is inaccurate then we could overestimate what a real probability of an event happening is
Dependent events
Probability of this event depends on the first event
“Draw a card from a deck, do not replace it”
Independent events
Probability of this event doesn’t depend on the first event
“Draw one card from this deck, and another card from another deck”
Conjunctive events
Known as the AND rule
Probability will decrease
Cumulative events
Known as the OR rule
Probability will increase
Heuristics
Mental shortcuts that can facilitate problem solving and judgements
Used when little information is available
Benefits to heuristics
Can reduce cognitive load
Look at a small amount of options quickly in a small amount of time
Drawbacks to heuristics
May result in irrational or inaccurate judgements
Accuracy depends on the environment
Availability heuristic
Make judgement based on how easy it is to bring an instance or occurrence to mind
Can lead to biases as making decisions based on information at hand, not necessarily the facts
K Study - Availability Heuristic
Tversky and Kahneman
Asked participants if more words begin with K or if more words have K as their third letter
Participants got it wrong as it is harder to think of words with K as the third letter
Shows that availability can lead us to make irrational and incorrect decisions
Representativeness Heuristic
Make probability judgements about the likelihood that an event arises from a category based on the extent to which the event is similar to the prototypical example of that category
Linda Problem - Representativeness Heuristic
Tversky and Kahneman
Gave participants a list of statements about Linda
Participants expected Linda to be a teller and a feminist more than being just a teller
Tversky and Kahneman put forward the representativeness heuristic as the information given makes people want to create links to make info coherent, even if it is against probability
Cumulative risks
Measure of the total risk that a certain event will happen during a given period of time
Probability of risks get added up overtime in situations and can have serious effects
Anchoring and adjustment heuristics
When estimating a certain value we tend to give an initial value then adjust it by increasing or decreasing our estimation
We often get stuck on that initial value (anchoring) which results in us making insufficient judgements
Portion size example - anchoring and adjustment heuristic
Easy to end up overeating when we are served a large portion when compared to a small one
All participants asked to guess how much food they could eat when primed with either a high, low or no portion anchor
When primed with a high anchor, people think they can eat more
