Decision Making Pt.2 Flashcards
Heuristics
Mental short-cuts that allow us to skip careful deliberation to draw an inference
Bias
Deviations from rationality (errors) that are caused by using heuristics
Availability Heuristic
A heuristic in which we estimate the probability of an event based on the ease at which it can be brought to mind
Availability Heuristic
People rate tornadoes as the larger cause of death, though it kills 20x less people than asthma. This is because it is easier to bring to mind deaths by tornadoes than asma.
This is an example of…
Affect Heuristic
The tendency to overestimate the risk of an event that generates strong emotional responses
Effect Heuristic
-People rate sharks as one of the most dangerous animals, especially after being exposed to media about shark attacks
-Yet people are much more likely to die from bees or wasps than sharks
This is an example of…
Representative Heuristic
People tend to make inferences on the basis that small samples resemble the larger population they were drawn from
-People base their judgements of group membership based on similarity
Base Rate Neglect
When you fail to use information about the prior probability of an event to judge the likelihood of an event
-Despite Tom’s profile, the overall likelihood of him being a psychology student is much higher than him being a student of mathematics because of the base rate!
Conjunction Fallacy
False belief that the conjunction of 2 conditions is more likely than either single condition
-The likelihood of an event is always higher than the likelihood of that event and something else
Anchoring
The tendency for people to overweight initial information when making decisions
-Particularly important for designing self-report scales
-Initial question influences answer you will get
Anchoring
Big # = primed to think of big #’s
Small # = primed to think of small #’s
Regression Toward the Mean
When a process is somewhat random (i.e. weak correlation), extreme values will be closer to the mean (i.e. less extreme) when measured a second time
-This is not a fluke; this is a statistical necessity
-1st time= a lot of variability, by chance
-2nd time= more observations, average out more, general regression towards everage
Bounded Rational
The theory that humans are rational relative to environmental constraints (e.g. time pressure) and individual constraints (e.g. working memory, attention)
-People are satisficers: we look for solutions that are ‘‘good enough’’
-‘‘Making do’’ with the limitations we have as humans
-Although heuristics sometimes provide incorrect answers and lead to biases; they also work
Under the bounded rational view…
Ecological Rationality
-the view proposed by Gerd Gigerenzer (1999) which seens heuristics not as a ‘‘good enough’’ approach to solving a problem but as the optimal approach
-A heuristic is the best solution to a particular problem; what is the best way for me to answer this question, given all of my constraints
-Given the right environment, a heuristic can be better than optimization than other complex strategies (that would require a lot of time)
Ecological Rationality
You are faced with a very difficult math problem and you choose to ask chatgpt (heuristic) instead of dwelling on it (complex strategy)
This is an example of…
the limitations we face
-but can sometimes produce correct responses (ecological rationality)
Heursitics and biases arise from…
biases
Applying heuristics too often can lead to…
Perceptual Decision Making
-Objective (externally defined) criterion for making your choice
-Are the dots moving left or right?
-There is a correct answer
-Simplest type of decisions
Value-based Decision Making
-Subjective (internally defined) criterion for making your choice
-Do I want cake or ice cream for dessert?
-Depends on motivational state and goal
-There is not external correct response
Decision Under Risk
-Decisions when outcomes are uncertain
-Ambiguity: when you have incomplete information out the consequences
-Many of our decisions in life fall under this category
-We try to make the best decision even though outcome is unsure
Risky Decision-Making
-When outcomes are uncertain, we still need to decide
-Extremes in risk taking (high or low) can be very harmful (e.g. stagnant living, addiction)
-Risks can be frames as gains or losses
-Most people are risk averse (people tend to avoid risk)
Risk Attitude Profiles
For each decision and decision-maker, we can describe the ‘‘risk profile’’
-What do people tend to like?
Risk Premium
Difference between expected gains of a risky option and a certain option
