Lecture 10

Question 1

What is Decision Making?

Answer 1

The process of making choices to achieve goals based on available information.

Question 2

What are Decisions?

Answer 2

Outcomes resulting from evaluating and selecting among alternatives.

Question 3

What is Reasoning?

Answer 3

Drawing conclusions through logical thinking.

Question 4

Why Study Decision Making?

Answer 4

To understand human behavior, improve outcomes, and identify cognitive biases.

Question 5

Who is Daniel Kahneman?

Answer 5

A psychologist who introduced the dual-process theory of thinking (System 1 and System 2).

Question 6

What is ‘Thinking Fast and Slow’?

Answer 6

Kahneman’s book outlining intuitive (System 1) and analytical (System 2) decision-making processes.

Question 7

What is System 1 Thinking?

Answer 7

Fast, automatic, and heuristic-based decision-making.

Question 8

What is System 2 Thinking?

Answer 8

Slow, deliberate, and logical decision-making.

Question 9

What are Heuristics?

Answer 9

Mental shortcuts that simplify decision-making but can introduce biases.

Question 10

What is the Availability Heuristic?

Answer 10

Estimating probabilities based on how easily examples come to mind.

Question 11

What influences Availability Heuristics?

Answer 11

Influenced by recency, vividness, and emotional impact.

Question 12

What is the Base Rate Fallacy?

Answer 12

Ignoring statistical probabilities in favor of anecdotal evidence.

Question 13

What is the Representativeness Heuristic?

Answer 13

Judging likelihoods based on similarity to stereotypes or categories.

Question 14

What is the Conjunctive Fallacy?

Answer 14

Assuming combined events are more probable than single events.

Question 15

What is the Framing Heuristic?

Answer 15

Decisions influenced by whether choices are presented as gains or losses.

Question 16

What are Anchoring Effects?

Answer 16

Tendency to rely heavily on initial information when making decisions.

Question 17

Who are Tversky and Kahneman?

Answer 17

Developed research on heuristics and biases in human judgment.

Question 18

What is the Law of Sample Size?

Answer 18

Smaller samples are less representative and more prone to error.

Question 19

What is the Gambler’s Fallacy?

Answer 19

Belief that outcomes will ‘balance out’ in the short term (e.g., expecting a win after a losing streak).

Question 20

What is the Hot Hand Fallacy?

Answer 20

Belief that success will continue during a streak of positive outcomes.

Question 21

What is Reasoning with Base Rate?

Answer 21

Involves properly considering statistical probabilities in judgments.

Question 22

What are the Benefits and Drawbacks to Heuristics?

Answer 22

Heuristics simplify complex decisions but may lead to errors.

Question 23

What is Positive Framing?

Answer 23

Presenting options as gains influences preference.

Question 24

What is Negative Framing?

Answer 24

Presenting options as losses influences risk aversion.

Question 25

How do Experts and Base Rate relate?

Answer 25

Even experts often neglect base rates, leading to errors in judgment.

Question 26

What did Cassells et al. (1978) study?

Answer 26

Study demonstrating base rate neglect in medical diagnoses.

Question 27

How can Diagnostics and Computers help?

Answer 27

Algorithms can reduce human error in decision-making processes.

Question 28

What is Intuitive Thinking?

Answer 28

Decisions based on gut feelings or immediate judgments.

Question 29

What is Deliberative Thinking?

Answer 29

Carefully analyzing information before making decisions.

Question 30

What is Satisficing?

Answer 30

Choosing an option that meets minimum criteria instead of optimizing.

Question 31

What is Utility Theory?

Answer 31

Describes how decisions aim to maximize value or utility.

Question 32

What is Expected Utility?

Answer 32

Weighing probabilities and outcomes to make rational decisions.

Question 33

What is Subjective Utility Theory?

Answer 33

Utility is based on individual preferences rather than objective measures.

Question 34

What is Loss Aversion?

Answer 34

Losses are perceived as more impactful than equivalent gains.

Question 35

What is the Sunk Cost Fallacy?

Answer 35

Continuing investments in failing endeavors due to prior commitments.