Task 5 - Decision-Making Flashcards
Judgment
Individuals using various cues to draw inferences about situtations and events
- > evaluated in terms of accuracy
- > component of larger decision-making process
Decision-Making
Individuals choosng amongst various options
- > evaluated in terms of consequences of decisions
- > involves problem-solving
Bayes’ theorem
probability of event, based on prior knowledge of conditions that might be related to the event
Base-rate information
relative frequency with which an event occurs, or an attribute is present in the population
-> people take it less into account than they shold
Fast-and-frugal heuristics
involve rapid processing of relatively little information
Judgment components
- Bayes Theorem
- Base-rate information
- fast-and-frugal heursitics
- > judgment task performance less related to intelligence and cognitive ability
Heuristics
- Representativeness
- Availability
- Take-the-best (fast-and-frugal)
Representativeness Heuristic
Assumption that representative or typical members of a category are encountered most frequently
-> conjunction fallacy
Conjunction fallacy
Mistaken belief that combination of two events is more likely than one of the events on its own
Availability heuristic
Assumption that frequencies of events can be estimated accurately based on how easy or difficult it is to retrieve relevant information from long-term memory
- > availability by recall
- fluency mechanism (judgin by how easy relevant instances are brought to mind)
Take-the-best heuristic (fast-and-frugal)
take the best ignore the rest: assuming that most valid cue is the one that comes to mind quickest): e.g. estimating Cologne larger than Berlin because it has a cathedral
- Search rule
- Stopping rule
- Decision rule
- Recognition heuristic
Search rule
searching cue in order of validity (e.g. name recognition)
Stopping rule
Stopping after finding a discriminatory cue (only applying to one of the possible answers)
Decision rule
choosing the outcome
Recognition heuristic
Using knowledge that only one out of two objects is recognized to make judgment
Heuristics advantages
- fast
- robust: can be used regardless of limited usefulness when information is sparce
- saves resources: we don’t like thinking hard when we can avoid it
Natural Frequency Hypothesis
Evolutionary account of strengths and weaknesses of human judgments
- natural sampling
- judgment improves when problems use frequencies (easier for humans than fractions and percentages)
- explains why people ignore base-rates
Causal Models
Humans possess causal knowledge allowing successful judgments in real world
- > lab problems fail to provide causal knowledge
- > more accurate judgments made in real-life
Dual-Process Model
System 1: fast, automatic, effortless, difficult to control or modify
System 2: analyitcal, controlled, rule governed, slower, effortful
Incongruent problem
problems in which description of person and base-rate information point to different answers
-> people fail to use base-rate information even though they process it (take longer to formulate answer)
Decision-making theories
Normative Theories
Expected utility theory
Subjective expected utility theory
Normative Theories
Focuses on how people should make decisions (rationally) not how they actually make them
Expected utility theory
We try to maximize utility (subjective value of outcome)
-> when we need to decide we assess expected utility
Expected utility = probab. of outcome x utility of outcome
Subjective expected utility theory
Using information from people’s references to combine subjective utilities and subjective probabilities
- > decisions impacted by factors other than simple utility
- > dominance principle
Dominance principle
Better of two similar options will be preferred
Prospect Theory
People attach more value to losses than to ains
- > people not rational agents (challenges expected utility theory)
- reference point is identified
- loss aversion main motivator
- positive value associated with gains increases slowly as gains increase
- negative value associated with losses becomes greater as losses increase
- rejects dominance principle
- sunk-cost effect
- framing effect
Loss aversion
individuals much more sensitive to potential loses than potential gains
-> most people unwilling to go 50-50
Sunk-cost effect
greater tendency to continue endeavor once an investment in money, effort, or time was made
-> individuals high in neuroticism more susceptible
Framing effect
Influence of irrelevant aspects of a situation (e.g. wording) on decision making
Emotional factors in decision-making
Impact bias sunk-cost effects Omission bias Status quo bias Rational-emotional model Brain areas -> emotions don't always impair: e.g. impaired VMPFC leads to poor decision-making
Impact bias
People overestimate intensity and duration of negative reactions to loss
Omission bias
individuals prefer inaction to action
-> level of anticipated regret greater when unwanted outcome has been caused by individual’s own actions
Status quo bias
tendency for individuals to repeat a choice several times in spite of changes in their preference
Rational-emotional model
decision-making determined by rational factors based on inferences and outcome information + experienced and anticipated emotion (based on regret and fear)
Social Functionalist Approach
Includes social context of decision-making
-> we feel need to justify to other people and ourselves
Complex Decision-Making
Decision-making in real life more complex than under lab conditions
- Multi-attribute utility theory
- Unbounded rationality
- bounded rationality
- Elimination by aspects theory
Multi-attribute utility theory
decision-maker goes through stages:
- identification of relevant attributes
- weighing attributes
- obtain total utility
- select option with highest weighted total
- > rarely used, too complex
Unbounded rationality
Assumes all relevant information is available for use and used by decision-makers
- > we optimize: best choice made
- > people often don’t make best choices
Bounded rationality
We produce reasonable or workable solutions to problems in spite of limited processing abilities by using heuristics (short-cuts)
- bounding factors: constraints in environment, mind (limited attention and memory)
- Satisficing
Satisficing
Individuals consider various options one at a time and select first one meeting their minimum requirements
- > satisficers content with reasonably good decision, maximizers want perfect decision
- > satisficers more happy, satisfied and optimistic
Elimination-by-aspects theory
Decision-makers as eliminating options by considering one relevant attribute or aspect after another
-> most people consistently limit amount of information they consider though
Unconscious thought theory
Conscious thought: constrained by limited capacity of consciousness
- > unconscious thought has large capacity and can rapidly weigh relative importance of different pieces of task-relevant information
- > unconscious thought might lead to superior decisions when decision-making is complex
Human complex decision-making gap to ideal
We only focus on some of the available information
- > limited capacity to process and remember
- > some aspects of decision-making irrational: preferences easily changed e.g. by order in which options are presented
