Judgment & Decision Making

Question 1

Normative Decision Making

Answer 1

What is the ideal decision

Question 2

Descriptive Decision Making

Answer 2

How do people make decisions?

Question 3

Prescriptive Decision Making

Answer 3

How to improve decision making

Question 4

Savage (1954) Subjective Expected Utility (SEU) (Normative)

Answer 4

Expected utility = P (of a given outcome) x U (utility of outcome)

Question 5

Does Simon’s (1957) Normative theory of Bounded Rationality assume that humans are rational?

Answer 5

No

Question 6

What are the 2 stages in Kahneman & Tversky’s (1979) Prospect Theory?

Answer 6

Editing & Evaluation

Question 7

In Prospect Theory (Tversky & Kahneman), what is ‘Loss Aversion’?

Answer 7

People feel losses more than equivalent gains

Question 8

Framing effects assert that decisions are influenced by what?(Tversky & Kahneman)

Answer 8

Decisions influenced by irrelevant aspects
Same choice can result in either:
-Risk-aversion
-Risk-seeking

Question 9

What is the core assumption of representativeness theory? (Tversky & Kahneman)

Answer 9

The more an object is similar to a class, the more likely we are to think it belongs to that class.

Question 10

Gambler’s fallacy asserts what kind of instances of a category as judged to be more probable than unrepresentative ones?

Answer 10

Representative or typical

Question 11

What is the conjunction fallacy?

Answer 11

Something unlikely is made more likely because associated with something that is probable.
The mistaken belief that the conjunction or combination of 2 events is more likely than 1 of the events alone

Question 12

What is the availability heuristic?

Answer 12

How easily something comes to mind

Question 13

Anchoring suggests what about initial estimated values?

Answer 13

Initial estimated values affect the final estimates, even after considerable adjustments
Once an initial answer has been reached - even if people are obliged to revise their answer, they usually use the first one as anchor.
* They reach their final estimate by making an insufficient adjustment to their anchor *

Question 14

Fast & Frugal Theory - Gigerenzer & Goldstein (1996)

Are critics of which theory?

Answer 14

Prospect theory

Question 15

What is the core assumption of recognition heuristics? Gigerenzer & Goldstein (1999)

Answer 15

“if one of two objects is recognised and the other is not, then infer that the recognised object has the higher value.”

Question 16

Is Savages’ Subjective Expected Utility (SEU) normative, descriptive or prescriptive?

Answer 16

Normative

Question 17

Is Simon’s bounded rationality normative, descriptive or prescriptive?

Answer 17

Normative

Question 18

Simon’s (1957) Normative theory of Bounded Rationality asserts that humans stop considering alternative decisions when?

Answer 18

We stop considering alternatives when we reach one that seems okay.

Question 19

Simon’s (1957) Normative theory of Bounded Rationality say that we use what to make decisions?

Answer 19

Heuristics

Question 20

According to Savages’ Subjective Expected Utility (SEU) (Normative), how does someone arrive at the best choice?

Answer 20

Need to consider all likely outcomes

Best choice = all known costs + benefits + probabilities

Question 21

The following sentence is an example of which heuristic?

“If a person looks like our stereotype of an accountant, then we are more likely to think they are an accountant.”

Answer 21

Representativeness (Tversky & Kahneman)

Question 22

In Kahneman & Tversky’s Prospect Theory what does one do in the editing stage?

Answer 22

Order outcomes using heuristics

Question 23

In Kahneman & Tversky’s Prospect Theory what does one do in the evaluation stage?

Answer 23

Use their attitudes to risks & gains

Question 24

Which heuristic is especially powerful when the judgment involves any form of frequency estimate?

Answer 24

Availability heuristic

Question 25

Which theory suggests that base rate of outcomes should be a major factor in estimating frequency but are often ignored?

Answer 25

Representativeness (Tversky & Kahneman)

Question 26

What is another way of phrase for the sunk cost effect?

Answer 26

Loss aversion

Question 27

Which heuristic suggests that people expect random sequences to be “representatively random” even locally?

Answer 27

Representativeness (Tversky & Kahneman)

Question 28

Is Kahneman & Tversky’s Prospect Theory normative, descriptive or prescriptive?

Answer 28

Descriptive

Question 29

In which heuristic do we use ‘Take-the-best’ [TTB]?

Answer 29

Recognition Heuristic

Question 30

What does Fast & Frugal Theory suggest?

Gigerenzer & Goldstein

Answer 30

Frugal – use only one piece of information

→ Fast – no need to integrate bits of information

Question 31

Which heuristic can explain the gambler’s fallacy that after a run of losses there will be a good chance of a win?

Answer 31

Representativeness (Tversky & Kahneman)

Question 32

The following is an example of which heuristic?

“Which of 2 cities has the larger population? If you recognize one and not the other, pick the one you have heard of.”

Answer 32

Recognition Heuristic

Question 33

Which of the following has not been argued as part of Gigerenzer & Goldstein’s (1996)
Fast & Frugal Theory?
a) It is adaptive;
b) It has ecological rationality;
c) It always gives the best answer;
d) It makes use of cognitive biases.

Answer 33

d) It makes use of cognitive biases.