LIT3 - Schulan, A. (2019). Behavioural Economics of Security. European Journal of Security Research, 4, 273—286. Flashcards
What are the two systems that explain human behaviour?
System 1; instinctive impulses
Works emotionally and subconsciously. It is suitable for trivial decisions such
that humans are able to make those decisions fast and easily.
System 2: rational deliberations
Decides analytically. Decisions based on System 2 require more efort but are
also characterized by a higher degree of objectivity.
Both systems employ heuristics and, therefore, might produce fallacies, but System 1 is much more affected because decisions are almost completely based on heuristics
What is thre relation betwween framing and risk behaviour?
The form of presentation (positive or negative) affects the subjective perception and the resulting assessment of the individual actors.
People are risk-seeking under negative framings, and risk-averse under positive
framings
What is prospect theory?
Prospect theory considers the initial situation and evaluates the respective alternatives for action relative to this starting point.
Prospect theory shows that persons facing two uncertain alternatives for action with the same positive expected value prefer the less risky alternative.
in case of choices involving a gain in utility people behave risk
averse.
If persons, however, face two uncertain alternatives for action with the same
negative expected value, they appreciate the risky alternative more than the less
risky alternative.
** in case of a utility loss, people are risk-seeking.**
What is the Representativiteness Heuristic
Representativeness heuristic
people make assignments by
comparing available information about a particular object or event with certain
categories and patterns
When people are asked to estimate the probability that an object belongs to a
certain category, they use the degree of the object’s representativeness for that
category as an indicator for the probability.
What is Base-Rate Fallacy?
When decisions are largely based on representativeness, other relevant information might not be sufciently considered.
The prior probability, or base-rate frequency of outcomes, describing the frequency
of an event in the population or in the past, is one kind of such information.
Neglecting such base-rate information is referred to as base-rate fallacy or base
rate bias.
What is Overconfidence?
Overconfidence represents a further fallacy associated with the representativeness
heuristic.
In that case, the confidence in the own ability to predict outcomes is
unjustifably high.
Overestimating the own forecasting ability, for instance for the occurrence of future
threats, must be prevented
What is Gambler’s Fallacy?
Gambler’s fallacy is present when
small samples are deemed to be representative for the general context
In that case, a person ignores the statistical independence of events.
In the area of public security, the fallacy described above might arise as well: decision makers might assume that the probability of random events increases because the events have not occurred for a longer period, or rather the probability decreases because the events occurred more frequently in the recent past.
What is Regression Towards the Mean
A further frequently occurring fallacy is the neglect of the phenomenon called regression towards the mean
For random events, regression towards the mean implies that an extreme
observation is, on average, followed by an observation which is closer to the mean.
However, regression towards the mean is often not intuitively recognized, such that people observing one extreme observation are prone to expecting extreme observations
for the future as well since they believe that the extreme observation was
representative
What is the Availability Heuristic?
The availability heuristic describes the fact that people assess probabilities
according to the mental availability of the corresponding events.
- If, for example, media reports about terrorism pop up more frequently, people become familiar with the topic. In consequence, they are able to bring that topic faster and easier to mind, and therefore, it is judged to be more likely to occur.
The availability heuristic also considers that the assessment of the probabilities of threats depends on individual experiences and observations.
What is anchoring?
The efect of anchoring causes people to
rely on an initial value (“anchor”) when
making estimates
To assess the probability of an event, this value can be adjusted by using other information. However, those adjustments are typically insufficient, such that the probability estimate is biased towards the initial value.
The anchoring efect can be a sensible and helpful heuristic.
If this anchor, however, is weighted excessively or based on irrelevant information, a fallacy will emerge.
