The psychology of choice Flashcards
Types of choice
- People choose if they are told to choose!
* Nisbett, R. E., & Wilson, T. D. (1977). Telling more than we can know: Verbal reports on mental processes. Psychological Review, 84(3), 231–259. - Reducing uncertainty
* Diagnostic hypothesis testing
* Prediction - Choosing between alternatives
* Rational vs. irrational decision-making (a chose made despite the evidence that says its a bad choice)
Choice- tights example
Brought people in to choose tights (even though they were identical)
They tended to choose the first thing (primary effect) or the last (recency effects).
When asked why they chose these, they tended to give a reason
Normative/ prescriptive models
(the choice you should make)
- what does rational mean?
- what gets optimised?
“Rational” = selecting optimally
What gets optimised?
* Expected Value: Highest resource value (e.g., money) = objective value * probability
* Expected Utility: Highest psychological value (e.g., reducing risk or uncertainty) = subjective utility * probability
Difference between expected utility and subjective utility?
Expected utility- how useful will the outcome be
Subjective utility- what you think its going to be worth to you
Expected utility- an example
Take umbrella, rains= encumbered, dry
Take umbrella, does not rain= encumbered, dry
Do not take umbrella, rains= free, wet
Do not take umbrella, does not rain= free, dry
Each of these things has a utility
How to calculate expected utility
EU(A) = Sum of PA(O)U(O)
A= the act
o= an outcome
O= set of outcomes
EU(A)= expected utility of A
PA(O)= probability of act given an outcome
U(O)= utility of that outcome
Violations of expected utility theory: certainty and framing
Treatment scenarios and what do people tend to chose?
falsify expectation of utility theory with framing
Scenario given and pp’s asked Which of the two choices for treating an epidemic would you choose? (Tversky & Kahneman, 1981)
1.
Treatment A:
Certainty of saving 200 lives
Treatment B:
A 33% chance of saving 600 people, 66% possibility of
saving no one
Found- when given a positive frame, 72% chose A
- Treatment A:
Certainty of 400 deaths
Treatment B:
A 33% chance that no people will die, 66% probability that all 600 will die.
Found- when they were given a negative frame, 22% chose A
Expected utility theory- which frame is better when theres uncertainty?
Negative frame is better when theres uncertainty
Prospect Theory (A descriptive theory)
Kahneman & Tversky (1979)
- Model
- Editing – selecting desired outcomes against a reference point via heuristics (availability (what info is easily accessible), anchoring (what value are you comparing against), representativeness (how familiar- usual or unusual is the info)
- Evaluation (subjective) –Value judgement based on calculation of anticipated utilities x probabilities - Loss aversion
- Faced with a risky choice leading to gains, individuals are risk-averse, preferring solutions that lead to a lower expected utility but with a higher certainty
- Faced with a risky choice leading to losses, individuals are risk-seeking, preferring solutions that lead to a lower expected utility as long as it has the potential to avoid losses. - Probability weighting
- People attribute excessive weight to events with low probabilities and insufficient weight to events with high probability.
(mad cow disease- transferred from animals to people and gave you a kind of dementia. It came from cows. Only 40 people got this)
Heuristics and biases: representativeness
Tversky & Kahneman (1983)
Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations. Which is more probable?
A) Linda is a bank teller.
B) Linda is a bank teller and is active in the feminist movement.
80% choose B → Conjunction fallacy (when a narrative concords with your stereotypes and prior knowledge, you tend to make a choice that is more restricted than a choice that requires less information)
(stereotype said in paragraph is requiring a conclusion made which requires much more information)
Heuristics and biases: anchoring
Stewart, N. (2009). The cost of anchoring on credit card
minimum payments.
Study and results
Participants received a mock credit card statement with balance of £435.76.
How much can they could afford to repay, and then to state how much they would repay. Participants saw either a statement that included a minimum payment of £5.42 or statement with no minimum
Result: Mean repayments higher by 70% without the minimum
payment: £99 (23% of the balance) vs. £175 (40% of the balance)
Anchoring by providing a minimum payment is reducing the amount that people pay back.
The amount of money people could re pay is not affected by the minimum payment.
What is pseudodiganosticity?
Bias that comes from selecting info that doesn’t actually discriminate between hypotheses
Hypothesis testing and pseudodiganosticity:
Island study and results
Mynatt & Doherty (1977)
Study:
Find a piece of shard between two islands that has a red glaze and blue clay. You know that 85% of shards that were found previously on island A have red glaze.
You’re only allowed to make a phone call to ask for one piece of info- which can include how many shards from island B have a red glaze, how many shards from island A have a blue clay or how many shards form island B have a blue clay.
Results
Majority of participants choose Island A Blue clay
However, Bayes theorem – Island B red glaze is the rational choice
Link pseudodiganosticity to island study:
Mynatt & Doherty (1977)
Belief that more information about
current hypothesis is the most diagnostic choice
You are confirming a choice that you’ve already made without testing the alternative hypotheses.
Testing prospect theory: reference reversals
Class A
* Moderately interesting
* Moderately difficult
* Prof is so-so
* 11 am Tuesday
Class B
* Very interesting
* Very difficult
* Prof is very entertaining
* 9 am Monday
Choice 1: You must choose one to sign up for.
Choice 2: You are enrolled in both, but must drop one.
In both scenarios, what do people choose?
Choice 1: You must choose one to sign up for.
People typically choose Class A
Choice 2: You are enrolled in both, but must drop one.
People typically choose Class A
The one they choose is the one they reject
