unaided decision makers Flashcards
what is bounded rationality?
decision makers usually don’t have the time or cognitive ability to arrive at optimal solutions, so strive to just be rational having simplified their options.
what is a decoy option?
when two options are similar, a third ‘ugly’ alternative of one will make the non-ugly seem better. (like medium popcorn being almost the same price as large).
what are the fast and frugal heuristics?
recognition, minimalist, take the last
what is the main thing Gigerenzer’s heuristics lack?
they don’t consider the importance of the attributes
how does lexicographical ordering work?
identify the most important attribute and select the option that performs the best on that. if there’s a tie, pick the option that performs best on the 2nd most important attribute etc.
what is lexicographical semi-ordering?
same as lexicographical ordering, but if two options are considered similar they can be considered equal. this can break transivity axiom
what is elimination by aspects?
performance cut-off for most important attribute established, eliminate the options below this. good for hard limits.
what methods are used where alternatives must be considered sequentially?
satisficing, reason based choice.
what is satisficing?
searching from one option to another until an acceptable (possibly not optimal) solution is found. non-compensatory and depends on the order the options are presented in. aspirations may change during the search.
when do people perceive risk as higher/less acceptable?
when there is less reward, they are involuntary or inescapable, when they are out of the person’s control, when the situation is unfamiliar or novel.
what does prospect theory believe about people’s perceived risk?
probabilities are overestimated when low and underestimated when high. however, when certain or uncertain, people act accordingly (certainty effect).
what does prospect theory believe about gains and losses?
people view outcomes from gains/losses from reference points. they have losses more than they love gains. risk averse with gains, seeking with losses.
