Decision-Making
Created by Axel Burch
| Term | Definition |
|---|---|
decision-making | >reasoning about choices
>each choice has costs and benefits |
costs | take us away from our goal |
benefits | take us towards our goal |
value/utility | weigh up benefits against costs to maximise value |
normative theory | >how decisions ought to be made
>assign different values to things
>imagine decision outcomes and their consequences
>judge usefulness of things |
SEU calculation | (Probability1xUtility1)+(robability2xUtility2) |
subjective expected utility theory | >normative, mathematically-oriented theory of decision making
>weigh up attributes according to probability
>choose option based on attributes best suited to needs, given constraints
>aims to maixmise utility |
descriptive invariance in SEU | description of decision task options should not influence option chosen |
evidence of descriptive invariance | (Tversky and Kahneman)
>scenarios identical in 'expected utility' but responses differed depending on 'gain' or 'loss' emphasis
>choices affected by framing effect |
framing effect in prospect theory | >risk-seeking decisions more likely with negative 'frame'
>risk-averse decision more likely with positive 'frame'
>violates invariance principle |
evidence for framing effect | >Asian disease problem
>health promotion problems |
prospect theory | >descriptive theory of decision-making
>explains how decisions are made, and how decision deviate from normative standards
>combines probability and utility |
cognitive heuristics | >reflexive mental shortcuts that simplify complex cognition
>increase speed and efficiency of thinking
>reduce cognitive load
>can lead to bias/error as not all relevant information considered |
heuristics | mental strategies used under certain conditions due to cognitive limitations, external constraints, or motivational constraints |
original approach | (Kahneman and Tversky)
>challenged dominance of normative models of thinking
>thinking under conditions of uncertainty not due to extensive information, but use of simplifying mental strategies
>cognitive model of bias in judgement and decision-making |
types of cognitive heuristics | >availability
>representativeness
>anchoring and adjustment |
availability heuristic | judging something based on ease of recall or mental stimulation of consistent evidence |
representativeness heuristic | judgements based in similarity between seemingly related things |
anchoring and adjustment heuristic | judgements based on numerical information |
evidence of the availability heuristic | >memory retrieval/mental stimulation of event-consistent information leads to bias
>e.g. reading news article about house fire lead to overestimation of occurrence chance |
evidence of the represetativeness heuristic | >violate normative principles when reasoning probabilistically
>'taxi cab' study- overestimation of probability that blue or green taxi involved in incident
>links to conjunction fallacy |
conjunction fallacy | >thinking error occurring with probabilities
>2+ non-perfectly correlated items judged as being more likely to occur together than separately
>violates 'extension rule' |
evidence for conjunction fallacy | >'Linda problem' study
>given information about characteristics, job, and interests
>judge likelihood of information about 'Linda'
>found 2 pieces more likely to occur together than any piece separately with their judgments |
extension rule | the probability of 2+ items occurring together can't be more likely than each of those events occurring separately |
evidence of the anchoring and adjustment heuristic | >wheel of fortune study
>Judge percentage of African nations in UN affected by ‘random’ number from ‘wheel of fortune’ beforehand
>judgments higher with high anchor value, so biased in direction of anchor due to insufficient adjustment |
biases | >overconfidence
>over-optimism
>explained by neglect of base-rate data
>linked with case-specific reasoning |
planning fallacy bias | >underestimation in laboratory and real-world tasks due to anchoring and adjustment heuristic
>reduced by prior task experience
>previous task performance as anchor for predictions |
gambler's fallacy bias | >tendency to look for order or sequences
>operational when judging repeated stimuli
>misconception of 'randomness'/'chance
>due to representativeness heuristic |
rationality of heuristics | >'adaptive' critique
>heuristics part of rational thought
>ecologically-rational and serves needs to function
>underpinned by bounded rationality theory and satisficing |
adaptive approach | >heuristics and biases approach too focused in probabilistic thinking
>frequencies more evident in real world
>hard-wired to think if things in terms of frequency |
frequencies vs. probabilities | >Gigerenzer et al.- cognitive biases disappear when probabilistic information presented in frequency format
>Griffen and Buehler- no effect of information presentation on base-rate data neglect bias |
cognitive toolbox | contents used to make effective judgement and decisions in real-world environments |
fast and frugal heuristics | >dealing with uncertain situations
>rarely lead to bias
>serve everyday needs and goal |
Gigerenzer et al.'s approach | >JDM not always error-prone in uncertain conditions
>rational judgments and decisions often made in uncertain conditions
>decisions made on basis of quick mental simulation of outcomes (satisficing) |
recognition heuristic | >basis for judgments and decisions when knowledge is limited
>'recognition' of relationship between cues in environment |
'recognition' | ecologically-rational JDM method when knowledge is limited and ignorant of topic/task |
recognition heuristic evidence | (Ayton and Onkal)
>no effect of prior knowledge on accuracy of judgments
>recognition of items useful in judgements |
'take-the-best' ecological heuristic | using the best cue from the environment |
'elimination-by-aspects' ecological heuristic | choosing by discriminating among attributes |
revised approach | (Gilovich et al.)
>reviewed 20yrs of heuristics and biases research
>original approach too descriptive and didn't identify cognitive mechanisms |
automatic vs. deliberate choice heuristics | >automatic (original) uses system 1 reasoning to save cognitive resources
>deliberate (fast and frugal) uses system 2 reasoning to reduce cognitive load |
affect heuristic | >identifying negative/positive stimuli quickly
>feeling states guide thinking under conditions of uncertainty |