Thinking Flashcards
What is the Rational Choice Theory?
Theory of thinking that states that humans are rational thinkers. We have full access to all alternatives, we know the probability and value of the outcomes & we can integrate all of this information to make a decision with the highest utility(value/goal achievement).
What is Herbert Simon’s Bounded Rationality theory?
States that humans aren’t as rational as the Rational Choice Theory because we have limited cognitive capacity i.e limited information on outcomes.
Human behaviour can be impulsive, habitual etc.
What is the difference between prescriptive, descriptive and normative models of thinking?
Prescriptive models- how we ought to think in order to make the best decisions
Descriptive- how we actually think- the thought processed
Normative-evaluate a decision in terms of the goal of the decision. Rational thinking is normative.
How does the rational choice theory say we make decisions under uncertainty?
We multiply the probability of the outcome by the utility in order to get the expected value. The option with the highest value is what we choose but it isn’t always the most rational.
Rational Choice Theory assumes that people choose the mathematically best option in terms of EV but it is very limited in explaining human behaviour. What behaviours show this?
Risk aversive and risk seeking. Risk seeking people prefer sure wins despite the risky option being a higher value. Risk aversive people prefer the risky option over a sure loss that ahs higher EV.
What theory explains why we maximise the expected value of gains more than losses?
The Prospect theory by Kahneman and Tversky(1981). Th utility is larger for losses as the graph is asymmetric.
What is the certainty effect and what did Tversky and Kahneman show?
People prefer certainty.
They showed that when one option is certain, risk aversive behaviour is seen When neither option is certain, risk taking is increased.
What is the Regret Theory?
We consider probailities after the fact.
Theory states that anticipated emotional states contaminate our subjective estimation of utility.
According to Prospect Theory subjective probabilities are….
less than 1.0 and underweighted compared to objective probabilities which are overweighted.
What are three examples of how people are poor when dealing with probabilities?
- Monty Hall problem-you should always switch!
- Probability matching-match the probability of choices with probability of reward but this doesn’t produce optimal behaviour.
- Base-rate neglect
How can the Temporal discounting phenomena explain inter-temporal choice?
We are more likely to choose an option that isn’t discounted by delay because it has the higher utility. For example, we would choose to gain £500 now rather than £1000 in 10 years.
Paul Samuelson’s Discounted Utility Theory includes the exponential discounting function. What 3 things does this show?
- If there’s no delay there’s no discounting.
- As delay increases the value decreases.
- As delay approaches infinity the present value approaches zero.
What function has the same 3 properties as the exponential function but accommodates dynamic inconsistencies.?
Hyperbolic function
What factors have an effect on temporal discounting?
Anticipated emotional state-Lowenstein (1996) argue that people with low discount rates aren’t exhibiting more self-control but in fact savouring the delayed gratification.
Impulsivity does however affect temporal discounting. Daily smokers discount future reward more than none smokers.
Khaneman and Tversky documented numerous deviations from normative decision-making. Their explanation was that…
people usually rely on heuristics to make decisions when limited information is available.
Describe the conjunction fallacy.
The conjunction of two events cannot be more likely than the probability of either event alone.
Tversky and Khaneman (1982) explain this by saying that as the amount of detail in a scenario increases, the probability can only decrease but it’s representativeness and hence it’s apparent likelihood may increase.
What is hindsight bias as illustrated in a study by Fischhoff (1975)?
Hindsight bias is the tendency to view what has already happened as inevitable without realising that retrospective knowledge is influencing on’es judgement.
What is the anchoring effect?
cognitive bias that causes people to focus on the first available information given to them when making decisions.
Attention: what is the cocktail party phenomena?
It is selective attention where we enhance relevant information and filter out distracting information.
What did Broadbent propose regarding selective attention?
The filter model which proposed an early selection view of attention where semantic processing was done after attentional selection.
What is attentional blink(Raymond et al, 1992)?
Attentional blink is when a behaviourally relevant stimulus is encoded and the capacity to encode another relevant stimulus is dramatically reduced.
