Judgement and Decision Making Flashcards
What is Decision Making?
Choosing amongst competing alternatives
What are the properties of a decision?
Mutually exclusive alternatives, Future consequences (different courses of action), and Different values
What are some examples of a decision?
What school to go to, what to eat, what movie to see, etc…
What is the Normative Approach?
The kind that people should make! Calculating probabilities, attaching numbers to values, carefully thinking it over, seeing how you can get the most out of this decision, and seeing the highest value/utility
What is the Descriptive Approach?
The kind that people really make–not carefully thought over and can be effected by the in-the-moment-emotionality
What is the Prescriptive Approach? What Approach is it NOT like?
A decision made based according to heuristics and based on biases (NOT like a Normative Approach)
Can Heurisitcs be helpful?
Yes, they can give a good solution until they don’t…
What is an example of a Normative Approach? (dice…)
Throwing a die and if it comes up with 6 you win $5 and it costs $1 to play–should you play?
What is the Expected Value(EV)? What kind of Approach is it used in?
EV = Average cost of winning(positive number) + Average cost of losing (negative number) – Normative Approach
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What are Descriptive Approaches?
Risk Seeking and Risk Aversion
What is an example of Risk Seeking?
When you chose a 50% chance to lose $200 rather than a sure loss of $100
What is the EV of a choice between a 50% chance to lose $200 or a sure loss of $100
EV: $100
What is an example of Risk Aversion?
When you chose a sure gain of $100 rather than a 50% chance to gain $200
What is the EV of a choice between a sure gain of $100 or a 50% chance to gain $200
EV: $100
When are people Risk Seeking and when are they Risk Averse? Why?
Risk seeking in the domain of losses (trying not to lose) and Risk Averse when in the domain of gains (going for the sure thing)
Can people changing their choice based on how the question framed be explained by the Normative Approach? What approach can it be explained by?
No! Cannot be explained by the Normative Approach, but can be explained by the Descriptive Approach
What is the Prescriptive Approach based on?
Heuristics and Biases
When are we likely to be influenced by Heuristics and Biases?
When really uncertain of what to do
What can Heuristics cause?
Judgement Errors
What are the three Heuristics?
Representativeness Heuristic, Availability Heuristic, and the Anchoring and Adjustment Heuristic
What is the Representativeness Heuristic?
When the subjective probability of something is determined by the extent to which it seems similar to its parent population
What is an example of a Representativeness Heuristic?
Taking the bet that the 6 rolls of 1 5 3 2 5 4 is more likely than the 5 rolls of 11111–although the second is more likely because it has less roles(but the first looks more like what we’re used to)———OR taking the chance that HHTHTT is more likely than HHHTTT even though they have equal likelihood
Biases all…
…represent judgement errors and are all part of the Representative Heuristic
What is the Gambler’s Fallacy and what Heuristic and approach is it a part of?
Midjuding a sequence as more “random” than another random sequence–a belief that an outcome that hasn’t happened yet is “due”
What Approach and Heuristic is the Gambler’s Fallacy a part of?
The Prescriptive Approach and Representative Heuristic
What is the Conjunction Fallacy?
Believing that a conjunction of events is more likely than any one
What Approach and Heuristic is the Conjunction Fallacy a part of?
The Prescriptive Approach and Representative Heuristic
What is the example of the Conjunction Fallacy?
People saying it was more likely that Linda was a bank teller and a feminist rather than that she was a bankteller
What is Base Rate Neglect?
Failing to consider the overall likelihood or frequency of something when making a decision
What Approach and Heuristic is Base Rate Neglect a part of?
The Prescriptive Approach and Representative Heuristic
What is an example of Base Rate Neglect?
People saying that the guy was more likely to be in CompSci than Humanities based off his description even though there were 3x more Humanities students at the time
What is the Base Rate Neglect a major problem in?
The medical field!
What is an example of Ignoring the Sample Size?
Believing that a Hospital with 6/10 babies being male with 10 patients and a hospital with 6/10 babies being male with 100 patients is equally likely
What Approach is the Availability Heuristic from?
Prescriptive Approach
What is the difference between a Judgment and a Decision?
A Decision has to do with two mutually/alternative choices; while a Judgment has to do with things that aren’t
What is the Availability Heuristic? Is it ever helpful?
Estimating the probability of something from the ease with which instances come to mind–ease of recall is sometimes a good clue of probability, but not always
What affects availability in the Availability Heuristic?
How good a cue is, Familiarity, Frequency, and How the problem is framed
What is an example of How good a cue is affecting Availability in the Availability Heuristic?
When people say that there’s more ING words than n words because they can think of more ING words
What is an example of Familiarity affecting the Availability in the Availability Heuristic?–What is the main thing it causes?
Overestimating how many women are in the list because you recognize their names more–Caused overestimation
What is an example of Frequency affecting Availability in the Availability Heuristic? What is the main thing this causes?
Living in NYC and seeing a lot of yellow taxis a lot and so overestimating how many yellow taxis are in other cities–Causes Overestimation
What do we base Frequency estimates on in the Availability Heuristic?
How easy it is to retrieve examples
What is an example of How the problem is framed affecting the Availability in the Availability Heuristic?
The car accident scenario! When the word describing the crash changes how people remember it
What is an example of the Anchoring and Adjustment Heuristic?
Spinning a random wheel and then asking the subject how much % of the united nations is African–and the subject basing their answer off of the random anchor
What drives the Anchoring and Adjustment Heuristic?
Initial anchors bias the estimate and the adjustments are generally inadequate/close to the anchor
What is the outcome of the Anchoring and Adjustment Heuristic?
Subjects are inappropriately swayed even when it’s clear that the anchor is random
What is an example of a Decision Architecture?
When organ donation is opt-out more people are willing to donate than if it’s opt-in
What is a Nudge?
When decisions are influenced by reminders, the type of food placed in the window–when cues effect behavior/decisions
What is Game Theory and the Prisoner’s Dilemma?
If one of the prisoner’s confessed against the other the other gets 10yrs and they get 0, if they both confess they get 6 each, and if neither confess they get 0(but if one gets greedy then they get the worse outcome)
What is an example of a intertemporal choice?
The Marchmellow Test! (Eat it now and get 1 or wait and get 4?)
What is the Advanced concept of Emotions and buying?
They influence our buying decisions (negative then we sell things for less)
How should people make decisions?
In the Normative Approach
How can biases be explained?
Through models (like prospect theory) and Heuristics
Why do people want to use Heuristics?
They are easy and often work well
