Decision Making Flashcards
Bayes’s theorem
A theorem that prescribes how to combine the prior probability of a hypothesis with the conditional probability of the evidence, given the hypothesis, to assess the posterior probability of the hypothesis, given the evidence.
Conditional probability
In the context of Bayes’s theorem, the probability that a particular piece of evidence will be found if a hypothesis is true.
Descriptive model
A model that describes how people actually behave.
Framing effects
Effects whereby people make different choices among equivalent alternatives depending on how the alternatives are stated.
Gambler’s fallacy
The belief that the likelihood of an event increases with the amount of time since the event last occurred.
Posterior probability
In Bayes’s theorem, the probability that a hypothesis is true after consideration of the evidence.
Prescriptive model
A model that specifies how people ought to behave to be considered rational.
Prior probability
In Bayes’s theorem, the probability that a hypothesis is true before consideration of the evidence.
Probability matching
Choosing among alternatives in proportion to the success of previous choices.
Recognition heuristic
A heuristic that applies in cases where people recognise one item and not another, leading them to believe that the recognised item has a high value than the unrecognised item with respect to a specified criterion.
Subjective probability
The probability that people associate with an event, which need not be identical to the event’s objective probability.
Subjective utility
The value that someone places on something.
Ventromedial prefrontal cortex
The portion of the cortex in the front centre of the brain. It seems to be involved in decision making and self-regulation, including activities like gambling behaviour.
