Judgement and decision making Flashcards
Define judgement
- The ability to estimate and
predict the character of unknown
events – judgement underlies
decisions - Deciding on the likelihood of
unknown events using
incomplete information
Explain decision making
-Assessing and choosing amongst multiple options
-If full information is unavailable – judgement is necessary
-Making choices by applying the laws of probability and by using heuristics.
-Factors involved in decision-making depend on the importance of the decision
What are maximisers like?
they find and make the best decisions/solutions for their own maximum benefit i.e. the best deal
* Analyse, compare and exhaust
all options to make a decision
* Spending time and energy
* Revising and choosing
* Unhappier with decisions
Define the law of probabilities in relation to decision making
the probability/likelihood of getting the following options then picking the option with the best choice (the expected utility)
Explain the process of maximisers in the law of probability
-assigns value to options
-estimates the probability
-expected utility
Expected utility calculation
value x probaility
What are satisficers like?
- Evaluate a few options
- Acceptable, ‘good enough’ options
- Do not spend time and energy
- Move on after making decisions
- Happier with outcomes
-humans tend to be satisficers usually
Why are we satisficers and not maximisers?
Bounded Rationality (Herbert Simon)
* Rationality = limited by various factors e.g., do not have full information
* Cognitive limitations e.g. STM storage so all options can’t stay
* Deadlines, to make decisions
How can we deal with bounded rationality?
heuristics
Define heuristics
A strategy or process used in decision-making giving us
a good and acceptable solution, but not guaranteed to be the
most optimal or perfect however decreases the cognitive load
Explain availability heuristics
-Misleading in decision making
* Prioritising irregular events based on recency and vividness e.g., more people scared of planes than cars even though cars have more crashes
* Risk-averse human behaviour (even if unlikely)
Explain the rules of availability heuristics
1.If examples come to mind easily then it must happen frequently
2.The frequencies of events can be approximated by how easy/difficult it is subjectively to retrieve them from LTM
(easy accessible information)
* This is used to inform decision making
What can easily accessible info be?
-more easily memorised info
-Something you have been affected by or has had a big impact on you
-Events that have happened more recently in your memory
- The availability heuristic is based on ease of retrieval. The easier something is to recall, the more likely you are to use it to form your beliefs and opinions
When else can availability heuristics be used for excluding dangerous/risky events?
- Work decisions
- Voting
- Trusting your instinct or gut
Mental shortcut - Not considering all facts with equal weighting = wrong assumptions / uneducated decision
Why does Availability Heuristic happen?
-Human cognition takes these mental shortcuts to facilitate in decision making
-Easy accessible info = more appropriate and easier to use that
information to make decisions
-How easy it is to recall things from memory = recent, vivid and impact
-Easier to base decisions on recent events
How can we avoid availability heuristic?
- Try not to make impulsive decisions or judgements – take some time to think about it
- Seek different sources
- Look at trends and patterns
- Consider the statistics
Define gamblers fallacy
because something hasn’t shown up for a while (e.g., heads instead of tails) it must come up now so they bet on it i.e. the expectation that the possible outcomes will average out in small
samples
Define the Law of Large Numbers
The average of the results obtained from a large
number of trials should be close to the expected value, and will tend to become closer as more
trials are performed. (e.g., 1000 coin tosses=more likely 50/50 chance heads or tails)
Define representative heuristics
a mental shortcut that we use when estimating probability (more distributed looking e.g. lottery numbers we assume “more random”)
Give an example of recognition heuristics
2 objects in front of us, and we have to pick one out of two:
* If we recognise one object and not the other recognised object = higher value
* Gigerenzer (2002) - individuals recognise one object but not
the other and no other info influences their judgement
* People can profit from inferences from missing knowledge
How do people decide which heuristic to use in judgement or decision-making tasks?
Two step process (Kruglanski and Gigerenzer 2011):
1. The nature of the task and individual memory limits the no. of available heuristics
2. Individuals select one heuristic based on the likely outcome of using it and its processing demands
Give 3 advantages of heuristics
1.Enables us to make fast decisions
2.Reduces demand on cognitive load
3.Usually acceptable solutions
Give 2 disadvantages of heuristics
1.May lead us to a worse solution
2.Can mislead us – gamblers fallacy
Define base rate neglect/fallacy
when people tend to ignore the base rate (i.e., general prevalence/disease frequency) in favour of the individuating information (i.e., information pertaining only to a specific case).
Simply define prospect theory
How people form decisions under uncertainty relating to behavioural economics (tend to make choice with most perceived gains)
True or false: Probability of a gain or a loss assumed to be
50/50 instead of actual probability presented AND the probability of a gain is typically perceived as
greater
True
True or false: Losses cause a weaker emotional impact > a
potential gain
False, losses cause a greater emotional impact
Explain the prospect theory Kahneman and Tversky (1979, 1984)
Potential gain=risk adverse (avoids risk)
Potential loss=risk seeking (takes risk)
*Certainty over risk – gains and losses are equal in likelihood
* Cause isolation effect=people focus on differences between options rather than similarities missing out on vital factors in decision making
* Fear of losses is greater than their joy of gains
