Decision Making

Question 1

normative approaches

Answer 1

attempt to establish ideal ways of deciding that will give the best decision possible

Question 2

Decision

Answer 2

the cognitive process of choosing between alternative possible actions

Question 3

descriptive approaches

Answer 3

aim to describe how decisions are actually taken as against how they should be made

Question 4

single attribute

Answer 4

decisions problems that involve alternatives that vary in only one dimension

Question 5

multi attributional decision problem

Answer 5

a decision task in which the alternatives vary in many dimensions or aspects

Question 6

expected value

Answer 6

the long-term average value of a repeated decision that is determined by the probability and size of the outcome.. a normative approach

Question 7

Expected value theory by Atkinson

Answer 7

postulates that motivation for a given behaviour or action is determined by two factors:
1. expectancy: how probable it is that a wanted (instrumental) outcome is achieved through the behaviour or action
2. value: how much the individual values the desired outcome. Individual’s ability beliefs, expectancies for success and subjective task values are crucial in determining individual’s choices, effort, persistence, and performance

Question 8

risk aversion

Answer 8

avoiding risky choices even when they have a higher expected value than riskless alternatives

Question 9

risk seeking

Answer 9

a preference for risky choices even when riskless alternatives of higher value are available

Question 10

utility

Answer 10

the subjective value of an option

Question 11

subjective probability

Answer 11

how likely a person believes an outcome to be irrespective of the objective probability

Question 12

Utility and Prospect Theory by Tversky & Kahneman

Answer 12

A decision theory stressing relative gains and losses. It describes how people evaluate their losses and acquire insight in an asymmetric fashion. Unlike the expected utility theory, which models the decision-making of perfectly rational agents, the prospect theory aims to describe the actual conduct of individuals.

Question 13

loss aversion

Answer 13

a key idea of prospect theory that there is a greater dislike of losing utility than liking for gaining the same degree of utility.
e.g.: A gain of a sum of money has less positive impact than the loss of the same amount of money has negative impact

Question 14

endowment effect

Answer 14

tendency to over value a possessed object and to require more money to sell it than to buy it in the first place

Question 15

status quo bias

Answer 15

a tendency to prefer the current state of affairs

Question 16

temporal discounting

Answer 16

the decline in subjective value of an outcome with a time delay to its being received

Question 17

preference reversal

Answer 17

when an original preference switches

Question 18

deliberation

Answer 18

a process by which decisions makers consider their options, representing the options and outcomes as well as evaluating them
involves: prospection, metacognition, sometimes opportunity costs

Question 19

prospection

Answer 19

the capacity to represent the future

Question 20

metacognition

Answer 20

awareness of one’s own thoughts and cognitive processes

Question 21

opportunity costs

Answer 21

the loss of potential gains from one alternative when another alternative is chosen

Question 22

framing

Answer 22

effects that arise when irrelevant features of a situation affect the decisions that are made

Question 23

invariance

Answer 23

the principle that choices between alternatives should not be affected by how the options are described

Question 24

heuristics

Answer 24

mental shortcuts that allow people to make fast decisions

Question 25

two major heuristics

Answer 25

availability: people judge the likelihood of an event based on how easily examples come to mind
representativeness: people make decisions based on how closely something resembles a typical example or prototype.

Question 26

conjunction fallacy

Answer 26

the mistaken belief that the conjunction of two events is more likely than either one of A or B

Question 27

Base rates

Answer 27

(of an event) is the overall probability of the event in a population

Question 28

multi-attribute utility theory by Neumann & Morgenstern

Answer 28

It’s a tool used to make decisions when faced with multiple alternatives and uncertain outcomes. It breaks down decisions into attributes, assigns weights to each attribute based on importance, evaluates alternatives on each attribute, combines scores, and selects the alternative with the highest overall utility score.

Question 29

two system approaches to decision making

Answer 29

system 1: automatic, implicit, fast, effortless
system 2: abstract reasoning, hypothetical, unemotional, operates slowly

Question 30

fast and frugal heuristics

Answer 30

A fast heuristic is easy to use and allows one to make judgments quickly. A frugal heuristic relies on a small fraction of the available evidence in making judgments.

Question 31

consequentialism

Answer 31

the view that decisions between options are based on the expected results or consequences of selecting each option

Question 32

utilitarianism

Answer 32

a theory of choice whereby choosers act so as to maximize their happiness or utility

Question 33

deontological approach

Answer 33

the view that decisions affecting others (ethical decisions) should be based on principles irrespective of consequences

Question 34

omission bias

Answer 34

the tendency to judge harms resulting from inactions (omissions) as less harmful or culpable than the same harms resulting from actions (commissions)

Question 35

punishment

Answer 35

from consequentialism pov punishment of actions is only valuable if it has a deterrent effect and prevents undesired acts being repeated by the perpetrator

Question 36

naturalistic decision making

Answer 36

an approach to understanding how people make decisions in real-world, complex, and dynamic situations. It originated from studies of expert decision makers, such as firefighters, pilots, and military commanders, who often face high-stakes situations with incomplete information and time pressure.

Question 37

recognition primed decision making

Answer 37

a model where experts rely on pattern recognition and mental simulation to make quick decisions in complex situations, rather than systematically evaluating all options.

Question 38

social judgement theory

Answer 38

suggests that an individual’s position on an issue depends on three factors: anchor, alternatives, and ego-involvement. This theory has a premise that there is a spectrum of whether one accepts or rejects a new piece of information.
Decision-making is affected by comparisons with others and the perceived range of acceptable options within a social context.