Decision Making Flashcards
What is Decision Making?
Making judgement when there is a choice involved
Weighing the costs and benefits to come to a decision
Value
A.K.A utility
Value is subjective: people value different things
Weighting Value and Probability
Base decision on the highest combo of estimated probability and value
Utility Theory
Utility is subjective
We think about expectations when making decisions: try to imagine consequence in advance
Rational/logical (normative) math-oriented theory of decision making
Trade-offs: choose option based on attributes most suited to needs
Goal of decision making: maximize utility
BUT: theory is not seen as psychologically plausible
Descriptive Invariance
Key principle of rational decision making The description (wording) of a decision task should not influence the choice
Gain/Loss Study (Tversky & Kahneman, 1981)
2 groups of p’s presented with the same scenario worded differently (one emphasized gain, one emphasized loss)
-‘Gain’ version: 72% go for safe option
-‘Loss’ version: 78% go for riskier option
IMPLIES: we are swayed by the ‘framing’ of options
Framing Effect
Make risky decisions for tasks framed in negativity - loss
Make safe decisions when tasks are framed in positivity - gain
Presentation effects choice
Thomas et al (2011) Negative Framing on Information Leaflets
Emphasizing risks of the sun on skin cancer made information leaflets more effective
BUT.. O’Keefe & Jensen (2007) say positive framing is generally more effective for health issue leaflets but certain issues effect what framing is best
Prospect Theory (Kaheman & Tversky, 1979)
Explains HOW decisions are made and how they deviate from normative standards
States that prospects of decision making are evaluated by the expected subjective value of the outcome (Bernoulli, 1738)
Suggests framing can cause bias
