Decision-Making & Reasoning

Question 1

Used to select from among choices or to evaluate opportunities

Answer 1

Judgement and Decision-Making

Question 2

The earliest models of how people make decisions

Answer 2

Classical Decision Theory

Question 3

1. Decision makers are fully informed. Regarding all options for their decisions and all possible outcomes of their decision option.
2. They are infinitely sensitive to the subtle distinctions among decision options.
3. They are fully rational in regard to their choice of options.

Answer 3

The Model of Economic Man and Woman

Question 4

The goal of human action is to seek pleasure and avoid pain.

Answer 4

Subjective Expected Utility Theory

Question 5

Based on the individual’s judged weightings of utility, rather than an objective criteria.

Answer 5

Subjective Utility

Question 6

Based on estimates of likelihood, rather than on objective statistical computations.

Answer 6

Subjective Probability

Question 7

Mental shortcuts that lighten the cognitive load of making decisions.

Answer 7

Heuristics

Question 8

Types of Heuristics

Answer 8

Satisficing [Satisfying]
Using Probabilities to Make Decisions
Elimination by Aspects
Representativeness Heuristics
Availability Heuristic
Anchoring
Framing

Question 9

Consider options one by one, and selecting an option that is satisfactory or acceptable.

Answer 9

Satisficing [Satisfying]

Question 10

We are rational, but within limits

Answer 10

Bounded Rationality

Question 11

Eliminate alternatives by focusing on aspects of each alternative, one at a time.

Answer 11

Eliminate by Aspects

Question 12

Judging the probability of an event to (1) how similar it is to the representative population and (2) the degree it reflects to the salient features of the process where it’s generated.

Answer 12

Representative Heuristics

Question 13

Prevalence of an event or characteristic within its population

Answer 13

Base Rate

Question 14

Making judgment based on how easily we can call to mind what we perceive as relevant instances of phenomenon.

Answer 14

Availability Heuristic

Question 15

People adjust their evaluations of things by means of certain reference points.

Answer 15

Anchoring

Question 16

The way options are presented influences the selection of an option.

Answer 16

Framing

Question 17

Biases

Answer 17

Illusory Correlation
Overconfidence
Hindsight Bias

Question 18

Being predisposed to see particular events, attributes, and categories as going together, even when they’re not.

Answer 18

Illusory Correlation

Question 19

Individual’s overvaluation of her or his own skills, knowledge, or judgment.

Answer 19

Overconfidence

Question 20

Looking at situation and believed seeing in advanced all the signs and events that led up to an outcome.

Answer 20

Hindsight Bias

Question 21

Erroneous judgment and reasoning

Answer 21

Fallacies

Question 22

A mistaken belief that the probability of a given random event is influenced by previous random events.

Answer 22

Gambler’s Fallacy and Hot Hand

Question 23

Individual gives a higher estimate for a subset of events than for the larger ones.

Answer 23

Conjunction Fallacy

Question 24

The decision to continue to invest in something simply because one has invested in it before and one hopes to recover one’s investment.

Answer 24

Sunk Cost Fallacy

Question 25

Don’t always lead to poor decisions because oftentimes, they are right

Answer 25

Heuristic Effects

Question 26

Prices paid for availing oneself of certain opportunities

Answer 26

Opportunity Cost

Question 27

Real decisions are created in high-stakes situations and natural environments.

Answer 27

Naturalistic Decision Making

Question 28

• Premature decision making, caused by group members’ attempts to avoid conflict
• Impairs the quality of decision making

Answer 28

Groupthink