Lecture 2

Question 1

Heuristics

Answer 1

reduce the effort people must put into making decisions by allowing them to examine fewer pieces of information, simplify the weights of different information, process less information, and consider fewer alternatives in making decisions.

Question 2

Biases

Answer 2

result when an individual inappropriately applies a heuristic

Question 3

Ease of recall

Answer 3

the availability of vivid stories in the media biases our perception. It describes the inferences we make about events commonness based on the ease with which we can remember instances of that event.

Question 4

Retrievability

Answer 4

individuals are biased in their assessment of the frequency of events based on how their memory structures affect the search process.

Question 5

Insensitivity to Base Rates

Answer 5

ignoring base rates has three unfortunate implications, People punish others for behaviour that ultimately led to bad outcomes, even when the outcomes were largely a function of chance. Ict guy or banker

Question 6

Insensitivity to sample size

Answer 6

sample size is rarely a part of our intuition. When responding to problems dealing with sampling, people often use the representativeness heuristic.

Question 7

Misconceptions of chance

Answer 7

individuals can expect probabilities to even out. In some situations, our minds misconstrue chance in exactly the opposite way. Our construal of chance often seems to rely on how controllable, intentional, and simple a goal appears.

Question 8

Regression to the Mean

Answer 8

individuals typically assume that future outcomes will be directly predictable from past outcomes. Thus, we tend to naively develop predictions based on the assumption of perfect correlation with past data.

Question 9

The Conjunction Fallacy

Answer 9

a conjunction (a combination of two or more descriptors) cannot be more probably than any one of its descriptors. By contrast, the ‘conjunction fallacy’ predicts that conjunction will be judged more probable than a single component descriptors when the conjunction appears more representative than the component descriptor.

Question 10

The Confirmation Trap

Answer 10

when we encounter information that is consistent with our beliefs, we usually accept it with an open mind and a glad hard. There are two reasons why we fall prey into the confirmation trap, there are limits to our attention and cognitive
processing. So we must search for information selectively, searching first where
we are most likely to find the most useful information.

Question 11

Anchoring

Answer 11

1. We often develop estimates by starting with an initial anchor that is based on whatever information is provided and adjust from the anchor to yield a final answer.
2. The existence of an anchor leads people to think of information that is consistent with that anchor rather than accessing information that is inconsistent with the anchor.

Question 12

Conjunctive and Disjunctive Events Bias

Answer 12

people tend to overestimate the probability of conjunctive events, or events that most occur in conjunction with one another, and to underestimate the probability of disjunctive events, or events that occur
independently.

Question 13

Hindsight and the Curse of Knowledge

Answer 13

we are typically not very good at recalling or
reconstructing the way an uncertain situation appeared to us before finding out the results of the decision. While our intuition is occasionally accurate, we tend to overestimate what we knew beforehand based upon what we later learned.

Question 14

Overconfidence

Answer 14

individuals tend to be overconfident of the correctness of their judgements, especially when answering difficult questions.

Question 15

Copycat brands

Answer 15

mitate the trade dress of other brands. Whereas counterfeit brands try to look identical to the imitated brand, copycat brands try to look similar but are not identical. When successful, copycatting increases consumers’ liking, willingness to pay, and choice rate of the copycat brand.

Question 16

Van Horen & Pieters

Answer 16

Copycat brands that operate in a related but different category than the imitated brand gain equity from their imitation practice, and the imitated brands lose equity.

Question 17

Brand awareness

Answer 17

affects the latter through its use as a heuristic for choice and its influence on perceived quality.

Question 18

Macdonald & Sharp

Answer 18

This indicates that brand awareness has a very strong effect on consumer choice for a common, repeat, purchase product; whereas, price has a moderate effect on choice.