L7 - Decision Making

Question 1

What are the stages of decision making?

Answer 1

• Identification stage (framing): realise there is a decision to make, can be changed by the way info is framed
• Generation stage: generate ideas and knowledge about our decisions
• Judgement stage: evaluate pros/cons of the decision and where heuristics are performed
• We experience loss as a worse feeling than gain

Question 2

What does making decisions lead to?

Answer 2

• Maximise risk
• Maximise benefit
• Loss aversion
• Reduce anxiety

Question 3

What is the pathway from evidence to decision?

Answer 3

• Evidence - Judgement - Decision
• We are always evaluating evidence, whether we are aware of that or not
• Some types of evidence is more reliable or informative than others
• Base rates = some things are more likely than others
• Utility = some outcomes are more consequential than others
• Adaptive/rational process should weigh and integrate various sources of evidence to arrive at optimum judgement to base decision on

Question 4

What is the rational approach?

Answer 4

• Probability
• Long-run fraction of time that an event would happen if a random process occurs over and over again under the same conditions

Question 5

How to calculate probability?

Answer 5

• Impossible event = 0
• Sure event = 1

Question 6

How to work out independent and dependent events?

Answer 6

• I = drawing a card then drawing another card from a different pack/flipping coin repeatedly
• D = drawing a card then drawing another from SAME pack/ recruitment process that has an exam then interview

Question 7

What are the rules of probability?

Answer 7

• AND rule - probability of multiple events e.g rolling a 6 and then a 2 = 1/6*1/6
• OR rule - probability of one event or another, when events are mutually exclusive e.g rolling a 6 or 2 = 1/6 + 1/6

Question 8

What are the key takeaways of calculating probability?

Answer 8

Conjunctive events:
- AND rule
- Individual probabilities multiplied
- Probability Is decreased

Cumulative probabilities:
- OR rule
- Individual probabilities are added
- Probability is increased

Question 9

What are heuristics?

Answer 9

• Mental shortcuts that can facilitate problem-solving and probability judgments
• Generalisations or rules of thumb
• Reduce cognitive load and can be effective for making immediate judgments
• Can result in irrational or inaccurate conclusions

Question 10

What are the three types of heuristic?

Answer 10

• Availability: uses info which comes to mind quickly or easily
• Representativeness: uses similarity to mental prototype
• Anchoring and adjustment: uses initial value with incomplete adjustment
• Heuristics are not inherently good/bad but there are pros and cons in using them to make decisions

Question 11

What is the availability heuristic?

Answer 11

• Describes tendency to use info that comes to mind quickly and easily to make decisions about future
• EXP: do more words begin with letter k or have it as third letter? 70% of ppts thought the beginning even though in a typical passage of text, there are 2X times the words with k as the third letter
• Implications: doctors are more likely to diagnose a given disease after having a recent experience with it AND perception of risk of natural disaster is higher after recent experience with it

Question 12

What is the representativeness heuristic?

Answer 12

• Describes our tendency to make a decision on the certainty of an event by assessing how similar it is to an existing mental prototype

Question 13

What is the Linda problem?

Answer 13

• Gives passage about linda and asked is she a bank teller or a bank teller and feminist?
• Ppt choose B as it is conjunctive of features that make ab instance more representative of the category, at the same time as it reduces the objective probability

Question 14

What was the Lawyers and Engineers Problem?

Answer 14

• Gave ppts 3 scenarios: gives simple stats and asks for probability of engineer e.g 30 are eng, 70 are lawyers,
• S2 = Same stats but gives description of different people with somewhat stereotypical traits
• S3 = same stats but gives neutral description of someone who is driven
• In S1 = people know what base rate is so guess probability accurately
• In S3 = people seem to ignore it in favour of other evidence even when evidence is not diagnostic and they have access to objective information (base rate)

Question 15

What is the anchoring and adjustment heuristic?

Answer 15

• When estimating a value, we tend to give an initial value and then adjust it
• Often get stuck on the initial value (anchoring), judgements are influenced by it
• Adjustment (up or down) is insufficient = leading to bias

Question 16

What was a study looking at the anchoring and adjustment heuristic?

Answer 16

• Wheel is spun
• Ppts asked whether the % of African countries which are in the UN are higher/lower than the number
• Ppts asked to estimate the exact %
• Higher estimates when wheel lands on 65, as ppts use this initial number as an anchor

Question 17

What are possible real-life effects in the anchoring and adjustment heuristic?

Answer 17

• Judges/prosecutors given criminal case notes and asked whether they think sentence for defendant will be higher/lower than 1/3 years
• Hypothetical sentencing lengths were significantly higher if exposed to a high anchor
• Effect was still found when sentencing anchor was random and ppts knew this AND when sentencing anchor was determined by ppt using a dice throw