Unit 14-15 Flashcards
normative models
predict how humans ought to behave or what would be most optimal - also called “rational” models
descriptive models
attempt to predict actual human behavior without regard for what is optimal
bounded rationality
a principle which suggests humans can’t make perfect decisions, but they can usually make pretty good decisions
expected value theory
we follow the math
expected utility theory
people are consistent
prospect theory
subjective probability trumps objective probability in decision making
regret theory
decisions made to avoid regret, even if not in one’s best interest
two rational principles that play a significant role in normative modeling
transitivity and non-contradiction
transitivity
if A is preferred over B, and B is preferred over C, then A is preferred over C
non-contradiction
if A is preferred over B, B is not preferred over A
violations of transitivity
complex dynamics may influence our perspectives of how choices compare with each other (election example)
violations of non-contradiction
our preferences are not absolute and can be influenced by contextual details
risk-seeking in context of framing effects
people tend to be risk-seeking when a problem is framed in terms of losses
risk-aversion in context of framing effects
people tend to be risk-averse when a problem is framed in terms of gains
framing effects
arise when utility decisions are impacted by the manner in which the options are presented
availability heuristic
the tendency of people to make judgments or decisions based upon what most readily comes to mind
representativeness heuristic
refers to cases in which an event is judged to be more likely if it features or properties are more like its category (farmer is astrophysicist example)
anchoring and adjustment heuristic
people make estimates on the basis of some starting or baseline value, and adjust from that point of view with new information
gambler’s fallacy
connected to representativeness heuristic
conjunction fallacy
error where people judge the likelihood of two conditions greater than the likelihood of each condition on their own
optimizing
when given a vast array of choices, examine each one of them and select the best option
satisificing
a small subset of choices is selected and an option within the subset is picked; it is assumed to be satisfactory, but not necessarily the best
elimination by aspects
a decision can be reduced to its various components; a desired component is selected, and every choice which fails to meet it is eliminated; repeated until only one option remains
