Week 6 Lec 11: Heuristics Flashcards
What is bounded rationality?
Decision makers have limited capacity for processing information
Depending on properties of the task environment and mental strategy, preferences will vary
What are multi-attribute choice options?
Choice among options with many features/attributes
How do we make a rational choice among these options?
By taking the subjective value of an option as the weighted sum of choice relevant attribute values
What is the MAUT?
Multi-attribute utility theory/technique
What are the features of MAUT?
Structured methodology designed to handle the trade offs among multiple objectives
Considers all relevant attributes of all decent alternates
Uses a weighted linear model to calculate evaluations
Result: Rank ordered evaluation of alternatives that reflect DM’s preferences
What were some early applications of MAUT?
Public sector and policy issues, privatization of healthcare, college sports teams
Power plant related decisions
Military development of new weapons
Ranking of college sports teams, degree programs
Outline the MAUT procedure
Step 1: Choose a set of relevant attributes
Step 2: Assemble or create a set of alternatives
Step 3: Score each alternative on each attribute
Outline weight attribution in MAUT procedure.
Step 1: Rank the attributes by its importance
Step 2: Create raw weights
Step 3: Standardize the weights by dividing each one by total weight
Outline summary evaluations in MAUT procedure
Multiply standardized weight by single attribute utility functions
Choose alternative with highest evaluation
Is the MAUT normative?
Yes, because it should lead to optimal choice
When does MAUT perform poorly?
When there is time pressure/other constraints
When it makes you pay too much attention to unimportant attributes
For when we have trouble identifying important attributes
What is the Equal Weighted Addition Model?
Adds attribute values regardless of importance (ignores attribute weights)
What is the Lexicographic model?
Model in which DM has pre-specified ordering of the importance of different attributes
If there is a clear winner on first attribute, you stop
Leads to extreme choices
What is satisficing?
Most people search sequentially and stop when a satisficing level of reservation utility is reached
Describe the model of satisficing
- Set cutoffs on all important attributes
- Consider alternatives one at a time
- Pick the first alternative that exceeds all cutoffs
Is satisficing alternative based or attribute based?
Alternative based strategy
Describe Caplin (2011) study on people satisficing.
Search theoretic choice experiment to study the impact of incomplete consideration on the quality of choices
Asked how long do people search for the best option before they make a choice
Results: Best option found less often in more complex situations, even when there is no time pressure
What is reservation utility?
The minimum level of utility that must be guaranteed to make a contract acceptable
Describe the Elimination by Aspects model.
- Pick the most important attribute and set a cutoff
- Pick the next most important attribute and set a second cutoff
- Continue through all attributes till only one alternatives remain
Is EBA an alternative or attribute based strategy?
Attribute based (consider all alternatives one attribute at a time)
How does EBA solve the lexicographic problem?
Solves the problem of choosing extreme options
What are shortcomings of the EBA?
May lead to poor decisions
Fails to ensure alternatives chosen are superior to those eliminated
What are choice heuristics?
Satisficing and EBA
What are disadvantages of choice heuristics?
May not choose best alternative
Choice may be affected by irrelevant factors such as search order
