Lecture 10 Flashcards
What is Decision Making?
The process of making choices to achieve goals based on available information.
What are Decisions?
Outcomes resulting from evaluating and selecting among alternatives.
What is Reasoning?
Drawing conclusions through logical thinking.
Why Study Decision Making?
To understand human behavior, improve outcomes, and identify cognitive biases.
Who is Daniel Kahneman?
A psychologist who introduced the dual-process theory of thinking (System 1 and System 2).
What is ‘Thinking Fast and Slow’?
Kahneman’s book outlining intuitive (System 1) and analytical (System 2) decision-making processes.
What is System 1 Thinking?
Fast, automatic, and heuristic-based decision-making.
What is System 2 Thinking?
Slow, deliberate, and logical decision-making.
What are Heuristics?
Mental shortcuts that simplify decision-making but can introduce biases.
What is the Availability Heuristic?
Estimating probabilities based on how easily examples come to mind.
What influences Availability Heuristics?
Influenced by recency, vividness, and emotional impact.
What is the Base Rate Fallacy?
Ignoring statistical probabilities in favor of anecdotal evidence.
What is the Representativeness Heuristic?
Judging likelihoods based on similarity to stereotypes or categories.
What is the Conjunctive Fallacy?
Assuming combined events are more probable than single events.
What is the Framing Heuristic?
Decisions influenced by whether choices are presented as gains or losses.
What are Anchoring Effects?
Tendency to rely heavily on initial information when making decisions.
Who are Tversky and Kahneman?
Developed research on heuristics and biases in human judgment.
What is the Law of Sample Size?
Smaller samples are less representative and more prone to error.
What is the Gambler’s Fallacy?
Belief that outcomes will ‘balance out’ in the short term (e.g., expecting a win after a losing streak).
What is the Hot Hand Fallacy?
Belief that success will continue during a streak of positive outcomes.
What is Reasoning with Base Rate?
Involves properly considering statistical probabilities in judgments.
What are the Benefits and Drawbacks to Heuristics?
Heuristics simplify complex decisions but may lead to errors.
What is Positive Framing?
Presenting options as gains influences preference.
What is Negative Framing?
Presenting options as losses influences risk aversion.
How do Experts and Base Rate relate?
Even experts often neglect base rates, leading to errors in judgment.
What did Cassells et al. (1978) study?
Study demonstrating base rate neglect in medical diagnoses.
How can Diagnostics and Computers help?
Algorithms can reduce human error in decision-making processes.
What is Intuitive Thinking?
Decisions based on gut feelings or immediate judgments.
What is Deliberative Thinking?
Carefully analyzing information before making decisions.
What is Satisficing?
Choosing an option that meets minimum criteria instead of optimizing.
What is Utility Theory?
Describes how decisions aim to maximize value or utility.
What is Expected Utility?
Weighing probabilities and outcomes to make rational decisions.
What is Subjective Utility Theory?
Utility is based on individual preferences rather than objective measures.
What is Loss Aversion?
Losses are perceived as more impactful than equivalent gains.
What is the Sunk Cost Fallacy?
Continuing investments in failing endeavors due to prior commitments.
