problem 6 - judgement

Question 1

judgement vs decision making

Answer 1

Judgement = involves deciding on the likelihood of various events using incomplete information (accuracy is key)

Decision-making = involves selecting one option from several possibilities (importance is key)
- If full information is unavailable, judgement is required

Question 2

what is bayesian interfence?

Answer 2

A form of statistical inference in which initial beliefs (prior probabilities) are modified by evidence or experience to produce posterior probabilities

Question 3

what is base rate information?

Answer 3

The relative frequency of an event within a given population
- Often ignored & deemphasized: ppl pay attention to the description rather than the base-rate info

eg. 70:30 ratio of lawyers & engineers but based on the description ppl on average decided it is 90% chance Jack is an engineer → ignoring the base rate 70:30

Question 4

what are heuristics?

Answer 4

strategies that ignore part of the information, with the goal of making decisions more quickly, frugally and/or accurately than more complex methods

Question 5

what is satisficing?

Answer 5

we consider options one by one, then select an option as soon as we find one that is just good enough to meet our minimal level of acceptability
- WM resources are limited → use of satisficing might increase
- have limited resources & time to make a decision → try to get as close as possible to optimising without actually optimising
eg. in an emergency scenario, we are seeking for someone with a phone

Question 6

what is bounded rationality?

Answer 6

we are rational, but within limits

Question 7

what is elimination by aspects?

Answer 7

we eliminate alternatives by focusing on aspects of each alternative, one at a time

Question 8

what is the representativeness heuristic?

Answer 8

the assumption that an object or individual belongs to a specified category because it is representative (typical) of that category

We judge the probability of an uncertain event according to:
1. How obviously it is similar to or representative of the population
2. The degree to which it reflects the salient features of the process by which it is generated (such as randomness)

Question 9

what is the anchoring & adjustment heuristic?

Answer 9

Use an initial statement (the anchor) & then adjust it to produce a final estimate
- Adjustment made is usually insufficient

Question 10

what is framing?

Answer 10

The way that the options are presented influences the selection of an option

Question 11

what is illusory correlation?

Answer 11

We are predisposed to see particular events or attributes and categories as going together, even when they do not

e.g. females have poor math skills

Question 12

what is the myside bias?

Answer 12

Tendency to favor info consistent with one’s prior beliefs over information inconsistent with those beliefs

Question 13

What is the confirmation bias?

Answer 13

The seeking or interpreting of evidence in ways that are consistent with existing beliefs, expectations, or a hypothesis

Question 14

what is the hindsight bias?

Answer 14

when we look at a situation retrospectively, we believe we easily can see all the signs and events leading up to a particular outcome

• Reflects our overconfidence
• Demonstrates that we often reconstruct the past so that it matches our present knowledge

Question 15

reasons for overconfidence

Answer 15

• Unaware knowledge is based on uncertain assumptions & unreliable or biased sources
• Examples that confirm our hypothesis are readily available, but we resist to search for counterexamples (confirmation bias)
• Difficulty recalling other possible hypotheses & decision making depends on memory: even if ppl manage to recall, they do not treat them seriously

Question 16

what is the gambler’s fallacy

Answer 16

A mistaken belief that the probability of a given random event, such as winning or losing at a game of chance, is influenced by previous random events

e.g. 5 successive bets lost, beliefs they are more likely to win the 6th

Question 17

what is the hot hand fallacy?

Answer 17

Belief that a certain course of events will continue

e.g. chance of scoring a goal is greater after previous goal than after a miss - in reality no such tendency

opposite of gamblers fallacy

Question 18

what is the conjunction fallacy?

Answer 18

mistaken belief that the conjunction or combination of two events (A & B) is more likely than one event (A) but less likely than the other (B)

Question 19

what is the double conjunction fallacy?

Answer 19

the conjunction of 2 events (A + B) is judged to be more likely than both of the events separately

eg. medical experts judge a patient to have both alcoholism & thalassemia trait than that he suffered from just one

Question 20

what is the sunken-cost fallacy?

Answer 20

the decision to continue to invest in something simply because you have invested in it before and you hope to recover your investment

Question 21

what is the availability heuristic?

Answer 21

we make judgments on the basis of how easily we can recall what we perceive as relevant instances of a phenomenon

eg. ppl asked about likelihood of death by murder vs suicide, murder judged more likely bc it attracts more publicity even though opposite is true

Question 22

how does recency affect the availability heuristic?

Answer 22

Your memory is better for items that you’ve recently seen, compared to items you saw long ago

Those more recent items are more available, we judge recent items to be more likely than they really are

Question 23

how does familiarity affect the availability heuristic?

Answer 23

Familiarity of the examples, as well as their recency, can also produce a distortion in frequency estimation

• media coverage + own experience
• estimates distorted by the frequency of the media coverage

Question 24

what is the recognition heuristic?

Answer 24

Compare the relative frequency of 2 categories, if you recognize one but not the other, you conclude that the recognized category has a higher frequency

eg. which city has more residents in Italy? Milan or Modena - you would
correctly respond that Milan has the greatest population

Question 25

what are confidence intervals?

Answer 25

The range within which we expect a number to fall a certain percentage of the time

• Our confidence intervals are usually too narrow
• Usually first provide a best estimate → use it as an anchor → we make adjustments upward/downward from this anchor to construct a confidence interval

Question 26

what is the framing effect?

Answer 26

The outcome of your decision can be influenced by two factors:

1. The background context of the choice
2. The way the question is worded

Question 27

what is the prospect theory?

Answer 27

Ppl tend to think that possible gains are different from possible losses:
- When dealing with possible gains, ppl tend to avoid risks
- When dealing with possible losses, people tend to seek risks

We choose options that demonstrate risk aversion when faced with an option of potential gains → smaller but certain gain rather than larger uncertain one unless it is tremendously greater

Question 28

what is the crystal-ball technique?

Answer 28

Asked to imagine that a completely accurate crystal ball has determined that their favoured hypothesis is actually incorrect; they must therefore search for alternative explanations for the outcome

Question 29

what is the planning fallacy?

Answer 29

people typically underestimate the amount of time required to complete a project; they also estimate that the task will be relatively easy to complete

Question 30

what is the expected utility theory?

Answer 30

When faced with some type of uncertain choice, we make our decisions based on two factors- the expected utility of the outcomes and their respective probability

Utility refers to whatever end a person would like to achieve

Whichever outcome provides the best combination of “good” & “likelihood of occurring” will be chosen