Judgement and decision making Flashcards
What is judgement?
Judgement refers to the mental process of forming an opinion, evaluation, or decision about a particular situation, person, or object by weighing their relevance and importance.
what are Inductive reasoning Characteristics?
- Heuristics
- Availability heuristics
- Representative heuristics
- Support theory
- Take-the-best heuristic
Explain Heuristics.
Are mental shortcuts that simplify decision-making. And are used in everyday life to navigate various situations without even realizing it, but can lead to errors. ex: when ordering food, u go with the freshest one in your mind instead of looking through the options.
Explain Availability heuristics.
involves judging the probability of events based on how easily examples or instances come to mind. People tend to over-estimate the likelihood of events that are more memorable or easily recalled. ex: u become fearful of things you see on the news (planes) because of its frequency even if the statistic is low.
Explain Representative heuristics.
involves judging the likelihood of an event based on how well it matches a prototype. People often make judgments based on resemblance, sometimes overlooking statistical information. ex: assuming a person is something because they fit the characteristics of the prototype (nerd).
Explain Support theory.
explains how people combine evidence to make judgments. Strong evidence leads to stronger conclusions. The higher the quality of evidence the stronger the argument. ex: gathering information on a particular investment stock.
Explain the Take-the-best heuristic
involves making decisions based on a single piece of information, prioritizing the most relevant cue. Individuals may rely on the simplification of decision-making, even though it can lead to errors. ex: when booking a hotel you prioritize location over amenities.
Explain Decision making
is a cognitive process that involves selecting one option or course of action from among several alternatives.
What are the simple/complex decision making skills?
Simple :
1. Utility approach
2. Prospect Theory
3. Loss aversion
4.the Framing effect
5. Sunk cost effect
Complicated :
1. Multi-attribute Utility theory,
2. Bounded Rationality
Explain the Utility approach
assumes that individuals are rational and will choose the option that maximizes their expected utility, where utility refers to outcomes that achieve a person’s goals. ex: choosing between driving or taking the train.
Explain Prospect Theory
suggests that people’s choices are better predicted by the values they assign to gains and losses rather than the values they assign to certain outcomes. It accounts for loss aversion and the framing effect. ex: people would avoid a bet if the potential loss is more significant than the gain.
Explain Loss aversion.
refers to the tendency for people to strongly prefer avoiding losses over acquiring gains of the same value. Losses are typically felt more intensely than gains. ex: it avoids winning if the emotional impact outweighs it.
Explain the Framing effect.
occurs when people’s choices are influenced by how information is presented or framed, rather than the information itself. ex: presenting the same medical procedure as having a 90% success rate versus a 10% failure rate.
Explain the Sunk cost effect.
- is the tendency to continue an endeavor once an investment in money, effort, or time has been made, regardless of the outcome. ex: continuing to watch a boring movie because you’ve already payed for it.
→ Impact bias, refers to overestimating the emotional impact of future events.
→ Omission bias, is the tendency to judge harmful actions as worse than equally harmful inactions.
→ Status Quo bias, is the preference for the current state of affairs over change.
Explain Multi-attribute Utility theory.
It considers decisions with multiple attributes, each with varying levels of importance. ex: choosing between smartphones based on their features.
