Professional Documents
Culture Documents
The Problem
Biases
Stereotypic decisions
What is a decision?
Person must have a goal
There must be many ways to satisfy the goal
There is a set of options
Consideration set: Set of options being
evaluated
Options are evaluated in some way
Eventually one of the options is selected
Economic approaches influenced much of the
psychology of choice
Theories assume people are rational and want to make
the optimal choice in a given setting
Rational decision making
What is the optimal choice i.e. best reflects the
person’s preferences?
Decisions should be consistent
Law of contradiction
Reasoning processes that use the same information
should reach the same conclusions
Those that do not are irrational
Example: Transitivity
If you prefer A to B, and B to C…
Two strains of the same disease will each inflict 10% of the
population. A vaccine is available that protects everyone
against one strain but not the other
Framing effects
Kahneman and Tversky
People treat gains and losses differently
Losses loom larger than gains
events
Representativeness
Insensitivity to predictability
Predictions based on limited info
Illusion of validity
Varying degrees of overlap among sources of
information
Tendency to treat dependent sources as independent
More sources of (dependent) information increases
confidence without increasing predictive accuracy.
Misconceptions of regression
Particular outcome, however extreme, may not
necessarily mark a significant turn of events
Regression to the mean
How the Cues are Utilized
Availability Heuristic
Judgments based on the ease to which
instances come to mind.
__ __ __ __ N __
__ __ __ I N G
Generate words?
Frequency?
Availability Heuristic
Bias due to retrievability of instances
Easier-to-retrieve info perceived as more
numerous
Solo members/Von Restorff effect
Bias due to (in)effectiveness of search set
E.g. more words that start with r or have r as
third letter
Availability Heuristic
Illusory Correlation
Not correlated or correlation only due to relationship to
third variable
Correlated to a lesser extent
Correlated in the opposite direction
If one event more frequent, something assumed to be
correlated with will be judged accordingly
Counterfactual thinking
Availability of alternate explanations
Other biases
Confirmation Bias
Tendency to seek or recall information that confirms a
hypothesis (or diagnosis) rather than information that
refutes the hypothesis.
Hmmm… I wonder if that’s seen in the sciences at all?
Lexicographic Semiorder
Like Elimination By Aspects
Look at the most important attribute
Select the option that has the best value on that
attribute
Mental Accounting
Thaler
Utility theory is a common currency theory
All options are evaluated with respect to utility
But all gains and losses are not viewed as the same
People seem to have a variety of mental accounts
Imagine you are shopping for a calculator and a jacket, and you
find them both at the same department store. The calculator
costs $25, and the jacket costs $120. You are told that a store
across town has both items, but the calculator is $15 cheaper at
that store. Do you go across town?
Most people say yes.
If the jacket is $15 cheaper, most people say no.
In each case, they have spent the same amount of money.
Mental Accounting
The idea is that people are creating separate mental accounts
for different goals.
Money for necessities
Money for entertainment
Spending money from one account does not affect others
Imagine you have gone to the movies to see a show. You got to
the front of the line and realized you lost $10, do you still go to
the movie?
Most people say yes
Imagine you have gone to the movies to see a show. The ticket
costs $10. You buy the ticket early in the day. When you get to
the theater, you realize you lost the ticket. Do you buy another
one?
Most people say no
Mental Accounting
House money effect
You go to a casino and put a quarter in a slot machine. You win
$100.
How is your gambling behavior affected?
People are often more willing to gamble in this situation
In the first case, people feel as if they are gambling with the
house’s money. In the second case, it feels like their own
money.
Adaptive Decision Making
People adjust decision-making strategies in
an adaptive manner
Satisficing, elimination by aspects, utility,
random choice may all be utilized depending
on the situation
Payne
Little time pressure, complexity normative
decision making procedures
More pressure, complexity more reliance
on heuristics
What makes a good Decision
Maker?
Use the best sources of information possible
Base decisions strictly on the information
given