Week 5: Judgment and Decision Making

Question 1

What is the normative framework for decision making?

Answer 1

Being completely rational such as by using expected utility theory or logic

Question 2

What is expected utility theory?

Answer 2

Looking at the likelihood of something happening and the expeced benifits

Utility = likelihood x benefit

Question 3

What are cognitive biases?

Answer 3

A specific pattern where we repeatedly behave irrationally

Question 4

What is conformation bias?

Answer 4

We’re naturally more prone to find information that supports our opinion

Question 5

What is hyperbolic discounting?

Answer 5

We prefer immediate benifits to the long term benifits

Question 6

What is the illusory truth effect?

Answer 6

Repeated information is more likely to be beleived

Question 7

What is the sunk cost effect?

Answer 7

We continue a behaviour because of previous investment, even when it is no longer sensible

Question 8

What is the ikea effect?

Answer 8

We prefer things we’ve made ourselves

Question 9

What is prospect theory?

Answer 9

This describes the systematic biases in our evaluation of benefits and liklihood

Question 10

Do we consider loss or gains to be more serious?

Answer 10

Loss

Question 11

According to prospect theory, how do we evaluate liklihood?

Answer 11

Overweight certainty - we find it more useful if an outcome is garunteed

Question 12

What is the framing effect?

Answer 12

The way we present information as a gain or loss affects how people see risk.

Prospect theory describes the biases and explains their effects

Question 13

How can we apply prospect theory to behavioural economics?

Answer 13

Status quo bias

Traditional models assume people act in a rational manner but we can exploit biases to shape policy

Question 14

What is the status quo bias?

Answer 14

We prefer things to stay the same in their defult setting

Question 15

How can status quo bias be used in organ donation?

Answer 15

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

Question 16

What is the lens model of judgement?

Answer 16

The normative framework where we identify all cues assess their importance and add them all up to an overall vaue

Question 17

What are heuristics?

Answer 17

Mental shortcuts used to reduce cogntive effort

Question 18

What is avaliability heuristics?

Answer 18

We use how easy it is to thik of an example to judge the liklihood of an event occuring

Question 19

Why can avaliability heuristics be a bad way to judge things?

Answer 19

Some things are memorable but less likely to occur such as terrorist attacks

Question 20

What is representativeness heuristic?

Answer 20

We use similarity to a catergory to judge liklihood

Question 21

What is anchoring and adjustment heuristic?

Answer 21

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

Question 22

What is the difference between mood and emotion?

Answer 22

Emotion is more differentiated and specific

Question 23

How does mood prime our decision making?

Answer 23

Bad mood enhances perception of risk, the opposite is true for good moods

Question 24

What is the somatic marker hypothesis?

Answer 24

Through experiance, events are associated with positive or negative feelings. When the experiance is encountered again, the feeling comes back

Question 25

What is the negative correlation beteen risk and gains?

Answer 25

As risk increaces, perceived gains decreases as they have opposing valence. Under pressure, this correlation increases as heuristics are more heavily used

Question 26

What is expert decision making?

Answer 26

Experts have extensive knowledge in their area and have templates stored to identify typica scenarios. This then allows for more complex analysis

Question 27

What is rapid primed decision making?

Answer 27

A model of expert decision making including situational assessment, diagnosis and mental simulation

Question 28

What is explanation based decision making?

Answer 28

People construct a causal model of what occured using general knowledge and evidence to form a story