decision making

Question 1

what is a decision and what does it involve

Answer 1

choosing an option from more than 1 option
-involves judgement = calculating likelihood of events using incomplete info

Question 2

what are the 2 key theories

Answer 2

utility theory
prospect theory

Question 3

what does the utility theory assume decisions do

Answer 3

maximise gains
minimise losses

Question 4

what is the expected utility theory

Answer 4

decisions made by predicting expected utility/ benefit of each available losses

Question 5

what should you take into account when making a decision according to expected utility

Answer 5

value of the loss or gain
chance of this actually happening

Question 6

how to calculate expected utility

Answer 6

value of outcome x probability of outcome

Question 7

what is the main weakness of expected utility

Answer 7

it fails to take psychology into account, based too much on economics

Question 8

post et al 2008 weakness of expected utility

Answer 8

decisions should be based on multiplying value by probability but Post found they were actually based on value and previous experience

Question 9

tversky and shafir 1992 weakness of utility theory

Answer 9

-toss a coin
-win £200 if heads, lose £100 if tails
-overall expected utility is gain £50
-EU predicts take the bet but 66% refused due to LOSS AVERSION

Question 10

what is loss aversion

Answer 10

risk of losing in both cases but a chance of avoiding losses in B
-sales teams know about loss aversion and use this
-e.g people prefer to hear “avoid £20 charge” than “£20 discount”

Question 11

what are the violations of expected utility theory

Answer 11

SUNK COST EFFECT Dawes et al 1988
-people continue if investment in time, effort, money etc has already been made
-e.g lose concert ticket but effort already been made to get there, travel costs, outfit etc so likely to buy another ticket even if not cost effective

OVER CONFIDENT
-we have overly positive view of our own decision making

FRAMING EFFECTS
-choices influenced by how info is presented

Question 12

what is an example of the framing effect

Answer 12

Tversky and kahneman 1981
-asian disease problem
-group 1: 1000 patients, no treatment = 700 die, treatment =70% all die 30% chance none die
-group 2: 1000 patients, no treatment = 300 saved, treatment = 70% chance none saved, 30% all saved
-pp asked if they would give treatment
-in group 1 78% replied yes, in group 2 only 28% said yes

-same data presented differently (framing)
-people swayed into decisions against expected utility

Question 13

what are 2 key weaknesses of expected utility

Answer 13

-assumes people are rational when they are not
-does not explain why we dont make rational choices e.g doesnt look at previous life experiences

Question 14

what is howards dilema

Answer 14

utility theory may not be applicable to real life, we dont actually multiply value by prob in real life

Question 15

who proposed the prospect theory and what does it aim to do

Answer 15

kahneman and tversky 1979/1984
-aims to explain loss aversion

Question 16

what are 2 key assertions of prospect theory

Answer 16

1.people identify reference point that generally represents their current state (risk averse or risk taker)
2. people are more sensitive to potential losses than potential gains e.g £100 loss might feel like a loss of £200, £100 gain might only feel like gain of £50

Question 17

-why does loss aversion occur
-research

Answer 17

kermer et al 2006
-loss aversion occurs bc people expect losses to reduce happiness more than gains of equal amount will increase happiness

-pp given $5 and did coin toss
-heads = gain $5, tails = loss $3
-pp estimated how they would feel if they won/lost
-estimate change from baseline happiness much greater for loss than gain
-in reality change in happiness is about the same for loss/gain (loss is not as bad as we think)

Question 18

weaknesses of prospect theory

Answer 18

-doesnt explain why we are loss averse
-ignores emotional factors influencing decision making
-ignores indiv diff in willingness to make risky decisions

Question 19

research demonstrating how emotions effect decisions

Answer 19

the trolley problem: Foot 1967
-train and pp in charge of lever to direct train down one track or another
-first track had 5 rail worker, switching tracks had 1 rail worker
-many people feel too much guilt to flick switch even though this is best option to save more people

Question 20

implications of trolley problem in real life

Answer 20

self driving cars- should technology run over family or an indiv if has no time to stop

Question 21

how does current motivational state impact decisions

Answer 21

affective forecasting: we are bad at predicting our future state and needs
self vs future self: we think of our future selves more as another person

Question 22

how does current emotional state impact decisions

Answer 22

-bower 1981, we demonstrate systematic bias in line with current feelings
-when happy we make more optimistic gambles, when sad we make more conservative gambles

Question 23

how does anticipatory arousal impact decisions

Answer 23

-affect as information: using gut feelings as though it is objective source of info
-srull 1983: uncertainty increases arousal so can have greater influence on decision

Question 24

research into unaccounted arousal as evidence for emotions effecting decision making

Answer 24

goldberg 1999
-group 1 watched video of criminal who did get punished
-group 2 watched videa where criminal did not get punished
-pp asked to judge on different case
-group 2 pp sig increased punishment on unrelated case

Question 25

what is omission bias and research evidence

Answer 25

-preference for inaction when engaged in risky decision
-role of regret in parents making vaccine choices (people overestimate how bad they will feel)
-brown 2010: parents willing to take higher risk of child getting disease than suffering adverse reaction to vaccine

Question 26

research evidence on patients with damage to emotion areas

Answer 26

shiv et al 2005
-15 pp damage to emotion areas (amygdala etc)
-7 pp with damage to non emotion areas of brain
-pp given $20 and could invest $1 at a time

neurotypicals invested 58% of time
damage to other regions invested 61% of time
damage to emotion regions invested 84% of time
(emotions make us excessively afraid of losses)

Question 27

contradictory evidence for patients with damage to emotion areas

Answer 27

Domansio
-7 pp damage to ventromedial prefrontal cortex
-normal IQ but impulsive, rude etc
-made risky and emotion based decisions unlike study by Shiv

Question 28

phineas gage

Answer 28

damage to prefrontal cortex
made emotional and impulsive decisions

Question 29

what is the somatic marker hypothesis

Answer 29

-each option retrieves an emotion associated with past experiences
-retrieved emotion includes peripheral arousal (somatic marker)
-somatic marker biases decisions

Question 30

evidence for the role of trust in decision making

Answer 30

Zak et al 2004
-studies oxytocin (relates to trust)
-pp each given $10
-pp 1 decides to give pp 2 some money
-if yes, amount is tripled and given to pp2
-pp 2 then decides to return some money to pp 1
-transfer from pp1 measures trust and transfer from pp2 to pp1 measures trustworthiness
-pp2 oxytocin increased after money given to them
-more oxytocin means more likely to give some money back to pp 1

Question 31

regions of brain for trust and distrust and research evidence

Answer 31

Dimoka et al 2010/11
TRUST
-caudate nucleus = anticipating rewards
-anterior cingulate cortex = willing to be vulnerable
DISTRUST
-insular cortex = fear of loss
-amygdala = neg emotions e.g anger

-pp asked to buy mp3 player from 4 ebay sellers with varying reviews
-pp less likely to buy from untrustworthy seller (worse reviews)

Question 32

research evidence for indiv diff and decisions

Answer 32

Rogers decision making task
-abstinent drug users and non users
-drug users made more risky decisions
-number of risky decisions increased as amount gambled increased
-neg correlation between risky decisions and anterior cingulate cortex (ACC)
-users showed decreased responses in ACC

Question 33

what are 2 weaknesses of complex decision making

Answer 33

-lab studies involve simple decisions so not representative of real life e.g what house should i buy
-lab studies usually involve one decision but in reality we make a series of decisions

Question 34

what is a key theory under complex decision making

Answer 34

multi attribute utility theory

Question 35

how does wright 1984 propose we make complex decisions under the multi attribute utility theory

Answer 35

1.idenitfy attributes relevant to decision
2. decide how to weight attributes
3.list all options under consideration
4.rate each option on each attribute
5.obtain total utility by summing weighted values
6.select one with highest weighted value

Question 36

what are the 3 weaknesses of the multi attribute utility theory

Answer 36

-utility theory shows we do not make rational decisions
-ranking attributes may not be linear e.g houses 5/10/15 mins away will be ranked same as houses 5/30/70 mins away
-do we actually do this in real life

Question 37

what is the elimination by aspects theory

Answer 37

tversky 1972: elimination of options one by one based on specific criteria until one option is left

Question 38

what are the 2 processes to the elimination by aspects theory

Answer 38

kaplan 2011: 2 stage process
1. elimination
2.detailed comparison of remaining few options
(support by Payne research into students choosing houses)

Question 39

what is memory guided decision making

Answer 39

-past experiences to make rapid decisions under pressure used by experts

Question 40

what did Klein 1998 say about memory guided decision making

Answer 40

-elimination by aspects typical for non experts
-experts use recognition primed decision model
-retrieve similar situation and evaluate whether previous decision is appropriate