Week 5: Judgment and Decision Making Flashcards
What is the normative framework for decision making?
Being completely rational such as by using expected utility theory or logic
What is expected utility theory?
Looking at the likelihood of something happening and the expeced benifits
Utility = likelihood x benefit
What are cognitive biases?
A specific pattern where we repeatedly behave irrationally
What is conformation bias?
We’re naturally more prone to find information that supports our opinion
What is hyperbolic discounting?
We prefer immediate benifits to the long term benifits
What is the illusory truth effect?
Repeated information is more likely to be beleived
What is the sunk cost effect?
We continue a behaviour because of previous investment, even when it is no longer sensible
What is the ikea effect?
We prefer things we’ve made ourselves
What is prospect theory?
This describes the systematic biases in our evaluation of benefits and liklihood
Do we consider loss or gains to be more serious?
Loss
According to prospect theory, how do we evaluate liklihood?
Overweight certainty - we find it more useful if an outcome is garunteed
What is the framing effect?
The way we present information as a gain or loss affects how people see risk.
Prospect theory describes the biases and explains their effects
How can we apply prospect theory to behavioural economics?
Status quo bias
Traditional models assume people act in a rational manner but we can exploit biases to shape policy
What is the status quo bias?
We prefer things to stay the same in their defult setting
How can status quo bias be used in organ donation?
We stick with the defult setting - in England this is NOT being a donor.
In Wales, you’re a doner by default so less people opt out
What is the lens model of judgement?
The normative framework where we identify all cues assess their importance and add them all up to an overall vaue
What are heuristics?
Mental shortcuts used to reduce cogntive effort
What is avaliability heuristics?
We use how easy it is to thik of an example to judge the liklihood of an event occuring
Why can avaliability heuristics be a bad way to judge things?
Some things are memorable but less likely to occur such as terrorist attacks
What is representativeness heuristic?
We use similarity to a catergory to judge liklihood
What is anchoring and adjustment heuristic?
An initial anchor is used to make judgement and then adjustments are made.
We don’t always make the correct adujustments so our anchors influence our responses
What is the difference between mood and emotion?
Emotion is more differentiated and specific
How does mood prime our decision making?
Bad mood enhances perception of risk, the opposite is true for good moods
What is the somatic marker hypothesis?
Through experiance, events are associated with positive or negative feelings. When the experiance is encountered again, the feeling comes back
