Intuition & Rationality Flashcards
Heuristics in judgement and decision-making
Simple, efficient rules people use to form judgements and make decisions. Mental shortcuts focusing on one aspect of a complex problem and ignoring others.
Heuristics usually govern automatic, intuitive judgements but can also be used as deliberate mental strategies when working from limited information.
Availability Heuristic
A mental shortcut that relies on immediate examples that come to mind.
The notion that if something can be recalled, it must be important. A bias towards recent information.
In a nutshell our brain takes the laziest route to make a decision. If it can access a vivid recent memory in relation to the decision it goes along with it.
(often employed when people assess the frequency or the plausability of a particular development)
The availability bias makes you think of the winners when you buy a ticket rather than all the losers.
Anchoring and adjustment heuristic
A psychological heuristic that influences the way people intuitively assess probabilities.
People start with an implicitly suggested reference point (the “anchor”) and make adjustments to it to reach their estimate.
The anchor has a great deal of influence over assessments and may have no relation to the subject being assessed.
(anchoring is usually numerical in nature)
The following is a study of _______.
In a study by Dan Ariely, an audience is first asked to write the last two digits of their social security number and consider whether they would pay this number of dollars for items whose value they did not know, such as wine, chocolate and computer equipment. They were then asked to bid for these items, with the result that the audience members with higher two-digit numbers would submit bids that were between 60 percent and 120 percent higher than those with the lower social security numbers.
Anchoring
Anchoring in negotiations
Anchoring sets a boundary that outlines the basic constraints for negotiation.
Anchoring can greatly influence the estimated value of a product or service.
Initial offers have a stronger influence on the outcome of the negotiations than subsequent counteroffers.
Anchoring effects not only starting value, but also starting scale.
General anchors = people adjust in larger increments.
Specific Anchors = peole adjust on a lowe scale.
Availability Cascade
Availability cascade is a self-reinforcing cycle that explains the development of certain kinds of collective beliefs.
Availability cascades occur in a society via public discourse.
Availability bias in business
Help your prospects and customers create mental shortcuts to remember your business.
- Use stories to communicate offering/value
- Systemize a way to keep in touch on a regular basis
