Decision Making (Pre-lecture 18) Flashcards
Decision making
Basically, reasoning/making judgements about choices.
Each decision/choice task or problem has costs and benefits..
Value (a.k.a. “utility”)
Value: utility in decision-making literature.
Value can’t be measured solely in money:
- value is subjective, because everything has personal value to us.
Logically/rationally, what we should do for each decision task is to weigh-up (weight) benefits against costs to maximise value.
Weighing values: list attributes based on values (eg. for = 1-10; against = -1 to -10).
- then you should base your decision one whether the pros outweigh the cons or vice versa.
- then may combine probability factor.
Subjective expected utility theory
Normative theory: how decisions should be made.
Subjective: assign different values to things.
ExpectedL try to imagine decision outcomes and their consequences in advance.
Utility: usefulness (value) of things.
- SEU calculation = P(outcome 1) X U(attribute 1) + P(outcome 2) X U(attribute 2)…
Is this a process something people go through all the time?
Literature says SEU is the gold theory of decision making but it’s a bit too ambitious.
Utility theory
Options weights according to probability.
Goal of decision making = to maximise utility- ideal decision making outcome.
Utility: what’s best for decision maker.
SEU: goodness of decision outcome.
Not seen as psychologically-plausible.
Descriptive invariance
About how information is presented to us.
Key principle of rational decision-making:
- description of decision task options should not influence option chosen- utility (not description) of options determines choice.
As rational decision makers we should not be swayed by the way info is presented; we should go purely on utility.
Study: (Tversky & Kahneman, 1981): ppts presented with two version of same scenario- one emphasised loss, the other emphasised gain.Both scenarios had a safe and risky option.
Results: Gain condition: safe option = 72% risky option = 28%.
Loss condition: safe option = 22% risky option + 78%.
Invariance study findings
Tversky & Kahneman 81 suggest: choices affected by presentation (‘framing’) of options- so violate ‘descriptive invariance’ principle of UT.
Suggests we aren’t logical decision makers.
“framing effect’:
- decisions more risky for tasks ‘framed’ in terms of loss (negative frame) and vice versa.
Framing effect
Options described in different ways:
- negative frame and risk-seeking.
- positive frame and risk-aversion.
Framing effect: violates invariance principle of utility decision making theory.
Manipulate task wording to study framing.
Subject of much research beyond forced-choice risk decision-making- choose riskier or safer option (eg. T & K, asian disease problem).
Popular in health psychology and advertising.
Frequently applied to judgment tasks- don’t involved forced-choice decision making.
Thomas et al, 2011: found negative framing of dangers of skin cancer, was more effective in performing behaviours that’ll reduce risk.
Prospect theory (K & T, 79)
Descriptive theory of decision-making.
Explains how decisions made, and how decisions deviate from normative standards.
Combines probability and utility (value).
Basis: prospects of decisions (attributes of tasks) not evaluated by expected monetary value (utility) of outcomes expected subjected value (utility) of those outcomes (Bernoulli, 1738).
Supported in several studies- often by the framing effect.
Summary
SEU theory: specifies criteria for rational decision making, but cannot explain non-rational phenomena (eg. framing effect).
Prospect theory: describes decision-making process and explained non rational phenomena (eg. violation of descriptive invariance principle).
- framing effect provides support.
