Reasoning - judgement and decision making

Question 1

Why are perfect decisions impossible?

Answer 1

Information is limited and ambiguous (imperfect information) and time for decisions and cognitive resources are limited (limited resources)

Question 2

What is the solution?

Answer 2

Heuristics

Question 3

What are heuristics?

Answer 3

Mental shortcuts to reduce processing demands on our cognitive systems.
Principle with broad application that is not intended to be strictly accurate or reliable for every situation

Question 4

What do heuristics produce?

Answer 4

Systematic errors - biases

Question 5

What are heuristics which are responsible for a range of biases and errors?

Answer 5

Representativeness, availability, adjustment and anchoring, framing =

Question 6

What is the availability heuristic?

Answer 6

• Probabilities are assessed by the ease with which instances come to mind
• Can be useful to assess the frequency and probability of an occurrence/event as more frequent events are more likely to come to mind
  However, the ease of the information from memory can impact our decision making - availability bias

Question 7

What is the adjustment and anchoring heuristic

Answer 7

• Different starting points lead to different estimates which are biased toward the initial value
• People will make an estimate and then adjust
  Irrelevant information can bias the initial estimate
  Adjustments can be insufficient –> errors

Question 8

Discuss framing

Answer 8

Gain framing - risk aversion
Loss framing - risk seeking

Question 9

What is the prospect theory - Yversky and Kahneman 1981

Answer 9

• A loss is perceived as more significant, and therefore more worthy of avoiding, than an equivalent gain
• A sure gain is preferred to a probable one, and a probable loss is preferred to a sure loss
• Because we want to avoid sure losses, we look for options and information with certain gain
  The way something is framed can influence our certainty that it will bring either gain or loss

Question 10

How do we know we are using heuristics?

Answer 10

Inconsistencies in decisionsB

Question 11

What makes a good heuristic?

Answer 11

• Applicable in many circumstances
• Doesn’t require lots of information or effort
  On average works