W10_lec3 Flashcards
(19 cards)
What is the traditional assumption about human reasoning in economics?
That people are rational and act like intuitive statisticians when making decisions under uncertainty.
What cognitive biases were central to Kahneman and Tversky’s critique?
1) Over-reliance on small samples
2) Representativeness Heuristic
3) Availability Heuristic
4) Loss Aversion
5) Remembering Pain
What is the Law of Small Numbers bias?
The tendency to draw conclusions from small samples, leading to extreme or misleading outcomes.
What fallacy is linked to the Law of Small Numbers in sports?
The “Hot-Hand” fallacy—believing a player is “on fire” based on recent performance.
What does the Representativeness Heuristic suggest?
We judge probabilities based on how much something resembles a prototype, not on actual statistics.
The “Linda” Problem
People often choose “bank teller and feminist” as more likely than “bank teller,” even though it’s a subset and therefore less probable.
How does representativeness bias our perception of randomness?
Sequences like “HTHTTHTHHT” are seen as more “random” than “HHHHHHHHHH,” though both are equally probable.
What is the Availability Heuristic?
Judging the likelihood of events based on how easily examples come to mind.
Why do people think more words start with ‘K’ than have ‘K’ as the third letter?
It’s easier to recall words that start with ‘K’.
What’s a real-world implication of availability on crime perception?
People think violent crime is rising because media coverage makes it more mentally accessible.
What were the death perception biases shown in the study?
Tornadoes judged deadlier than asthma (though asthma causes 20× more deaths), and accidents perceived as 300× more deadly than diabetes (actual ratio 1:4).
How does availability affect marital satisfaction reporting?
Listing 10 reasons for liking a partner lowers satisfaction ratings compared to listing just 3, due to effort and recall difficulty.
What is loss aversion?
The psychological principle that losses are felt more intensely than equivalent gains.
In the framing example, what pattern of decision-making was observed?
People prefer sure gains over gambles, but prefer gambles over sure losses—even with the same expected value.
In coin-flip gambling, how do people typically respond?
Most reject a 50/50 bet of losing $100 unless the potential gain is at least $200, illustrating loss aversion.
What is the key feature of loss aversion’s value function?
It is asymmetric: losses loom larger than gains.
What did studies on colonoscopy patients show about pain memory?
Patient B objectively experienced more pain but reported the procedure as less painful than Patient A.
What rules explain retrospective pain judgments?
Peak-End Rule: Retrospective pain is the average of the peak and final pain levels.
Duration Neglect: Total duration of pain has little effect on memory of it.
Why do people misremember pain episodes?
Because the availability of peak and end moments biases their overall judgment of the experience.
