SPRING Decision Making Flashcards
shafir and le boef view of rationality 2002
largely entitles to own preferences so long as adhere to basic rules of logic and probability
not be formed on the basis of immaterial factors ie mood or contrext
what types of decisions can we make
riskless
decision under risk
decision under uncertainty
define decision under risk
outcome of each decision known
define decision under risk
probabilities of outcome known but not true outcome
define decision under uncertaintly
dont know probability or exactly what cold occur
must estimate or guess
what is expected vaue theory
outcome = probability of occurance x monetary value
what you shold do based on an idealised version of the world - always a dominant right answer
what is expected utility theory
outcome = probability of occurance x utility value
utility value is subective and doesnt have exact monetary value
what is subjective expected utility theory
outcome = subjective probability x subjective utility value
subjective prob - not ebery situation is probabalistic - percieved likelihood of occurance when there is no set value - rely on estimates of the world
assumptions of subjective expected utility
seek to maximise SEU
tansitivity of preferences
invariance of preferences
consistency = rationality
assumptions of SEU maximise
wish to chose option of greatest gain
assumptions of SEU transitivity of preferences
assumes choices are well order ie a>b and b>c then a>c
assumptions of SEU invariance of preferences
preferences remain the same irrespective of the way the options are described (descriptive invariance), the way the choice is made (procedural invariance) or regardless of how the choice is expressed
elimination by apects (tversky 1972) violation of SEU
start with most important attribute and set cut off value - all below are eliminated
continue to next attribute etc until only one option remains
- big choices
satisficing (simon 1956) violation of SEU
consider one alternative at a time in the order they are presented - compared to predetermined cut off
first to pass all cut offs is selected
violating transitivity (tversky 1969) violations of SEU
dont always have transitive preferences
chose between a (more social but less intelligent) or e (less social but more intelligent) chose E even though prev chose a
larger diff compared to a>b etc
violative descriptive invariance (tversky and kahenman 1981) violations of SEU
framing effects
aisian disease problem - people saves chose a (least risky) but people die chose b (more risky)
more sensitive to loss so chose risk to prevent as much as possible
risk averse for gains and risk seeking for loss
kahenman and tversky 1979 prospect theory
expected utility not as straight as economic choice assumes
marginal value of gains and lossess decreases with mag (ie 200 vs 300 > 1200 vs 1300)
depend on reference point (what you have adapted to ie temp) in how you judge and compare outcomes - ie object hot or cold dependent on the temp to which one has adapted (same with wealth ie pov see high gain)
eval relative to what could have happened
BUT feel loss stronger than feel gains
coucil tax and prospect theory
offered rebait on council tax (gain back loss) or money for insulating homes
more chose tax back as seen as getting back loss
ie lottery lose more value
donoval and jallen 2000 framing effects in real world
immunisation problem
a. 90% chance no side effect or b. 10% chance side effect
increased choice of a becuase positively framed
violating procedural invariance (lichtenstein and slovic 1971) violation of SEu
given EV choce of betting
a. 99! win £4, 1% chance lose £1 or b. 33% chance win £16.67 and 67% chance lose £2
EV best choice is a by one penny
but when pay more to bet chose b - focus more on potential winnings than the highest probability
what is percieved justification
violation of consistency
our tendency to want to be able to justify the decisions that we make
tversky and shafir 1992 percieved justification
buy holiday, dont buy or pay £5 to postpone
group a and b pass or fail exam both buy
group c waiting for results postpone
- need reason
what is anticipated regret
decisions affected by the amount of regret we anticipate as a result of possible outcomes
what is prefactual thinking
linked to anticipated regret
think about what might happen
bar hillel and neter
anticipated regret - prefactual thinking
give pen and swap - yes
give lottery ticket and swap - no
hetts et al 2000 anticipated regret
car regret (car stolen if dont check) - go check car or test regret (care fine and late for test) - go to test
thing you think you will regret determines your decision to act
mcconnell et al 2000 anticipated regret and purchase decisions
regret if buy now and cheaper elsewhere
price guaruntees - once buy stop looking and unlikely to refund
dual process theory of decision making
stanovich 1999
system 1
universal cog across species
instinctive behaviours innately programmed
reapid parallel and automatic processess
ie heuristics
dual process theory of decision making
stanovich 1999
system 2
evolved uniquely to humans
slow and sequential use of wm
permits abstractthinking
weighs choices
dual process theory of decision making
evans 2013
type 1
the source of Type 1 processing in the brain is
not always in areas regarded as evolutionarily old
do not required “controlled
attention,” which is another way of saying that
they make minimal demands on working memory
resources
dual process theory of decision making
evans 2013
type 2
engages a singular central working
memory resource, is highly correlated with
fluid intelligence - involves cognitive decoupling and hypothetical thinking—which requires a strong loading on the working memory resources
the feature that
makes humans unique—is cognitive decoupling: the
ability to distinguish supposition from belief and to aid
rational choices by running thought experiments
prob with dual processing theories in decision making
evans 2013
good and bad decisions eval
fallacy in dual-process theories is that Type 1 (intuitive, heuristic) are responsible for all bad thinking and that Type 2 (reflective, analytic) necessarily lead to correct
responses - blame Type 1 processing for cognitive biases in reasoning and judgment
BUT Rationality is an “organismic-level concept”
and should never be used to label a subpersonal
process (i.e., a type of processing)
Subprocesses of the brain do not display rational or irrational properties per se, although they may contribute in one way or another to personal fallacy that Type 1 is invariably nonnormative and Type 2 is invariably normative. BUT Type 1 processing can lead to right answers and Type 2 processing to biases in some circumstances
dual process theory
neuro evidence
McClure, Laibson, Loewenstein, and Cohen
(2004)
reported that distinct neurological systems were
associated with monetary decisions made on the basis of
immediate or deferred reward. In our dual-process theories,
the latter would involve mental simulation of future
possibilities and hence require Type 2 processing.
Consistently, the authors reported that prefrontal and
frontal cortical regions were activated here, whereas
immediate decisions were associated with the limbic system.
expected utility theory
characteristics of utility
averaged across various possible states and outcomes weighted according tho the prob of these states
values must be meaningfully different for oeachother in order to make a decision
subjective expected utility and prospect theory
le bernoulli
$1 a lot compared to 0
BUT $10 not sig different from $100
more willing to give away
- increments in utility decrease with wealth and more risk averse
assumptions in SEU
consistency
consistency in choice denotes a rational decision
problem with elimination by aspects in failure to max SEu
doesnt necessitate that the best choice will be made
get overall average and may miss out on option that is better in other areas
problem with satisfycing in failure to max seu
not likely to get the optimal choice
get one that satisfies all criteria but not maximises
define framing effects
the way in which a choice may be affected by the order in which the info is presented to the decision maker
- tendency to fixate on the way in which info is presented to us (concrete principle)
describe the asian disease problem (violating descriptive invariance)
USA prep for outbreak of Asian disease
a -200 save or b - 1/3 600 save and 2/3 0 saved
or
a - 400 die or b - 1/3 no one die and 2/3 600 die
despite overall being the same relative outcomes, most chose a in save and b in die
define the concrete principle
slovic 1972
people accept and use info in the way in which they recieve it
define acceptance (k+t)
decision maker unlikely to recast the construction of a choice once it is presented to them
define segregation (k_t)
tendency to focus on the aspects of the immediate situation that appear more relevant
therefore - asian flu - fail to account for the probability of asian flu actually occuring
johnson et al 1993 descriptive invariance
pref for insuranse dependent on if describe as a rebate or a deductable (pay to insurer before accident)
NJ and P offer reduced insurance if give up right to sue following collision
nj - no right to sue but purchase if want - 20% purchase right
p - default right to sue but decline and get reduced - 75% purchase
- p frame deductable as a oss and thereofre pay additional insurance even if not necessary
problem with asian disease problem
kuberger 1995
outcomes often inadequately specified
does not explicitly state what will happen to the other people
“0 saved”
describe the psychology of sunk costs
percieved justification
arkes 1996
tend to commit to sunk costs -
people are motivated to avoid the perception of being wasteful so compromise self interest to ensure getting moneys worth
BUT already paid - technically does not matter
define omission bias
preferenec for inaction over action in fear of regretting choices made
ritov and baron 1990 omission bias
people dont vaccinate children due to potential harm BUT subsequently increase the susceptability of the child to even more harmful disease
vilations of failure to max SEU
elimination by aspects
satisfycing
violations of invariance of preferences
violating descriptive invariance - framing effects
violating procedural invariance
rothman and salovet 1977 descriptive invariance in healt behaviour
disease prevent = gain ie wear sunscreen disease detect = los ie screening more motivated to engage in health beh if gain > loss
violation of consistency
percieved justification effect
anticipated regret
