CP Decision Making

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Judgements VS decision making?
Judgements focus on estimating the likeliehood of events, and are evalutaerd in terms of their accuracy. Decisions are the processes involved in deciding on a course of action, and evaluated in terms of their consequences
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Probabilistic judgement?
Relative probabibilities (of hypothesis after data), prior odds (after data obtained) and likelihood ratio (based on which of two is more likely)
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Taxi cab problem?
Old data: 85% are green 15% are blue. New data: 20% of time was wrong saying it's blue (so 20% blue)
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Taxi cab problem solution?
She doesn't identify 100% of the cabs, only 29. A 41% probability that the taxi-cab was blue compared to 1=59% that it was green
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Neglecting base rates?
Base rate information: the relative frequency with which an event occurs in the population
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Heuristics?
Judgement strategies that typically produce the correct solution and are efficient, but not ALWAYS correct
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Representativeness heuristic?
More representative events are thought to have a higher probabibility of occurence
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Availability heuristic?
More esaily retrieved information is thought to be more frequent
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Support theory?
Need to distinguish between events themselves and the descriptions of the events
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Support of support theory?
Mandel (2005): estimated probability of a terrorist attack was judged as greater than the perpetrator's identity was made explicit
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Strengths of heuristics?
Used by everyone and have influenced economics, philosophy and science
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Weaknesses of heuristics?
Unclear on how they reduce effort, individual differences are under researched and some errors can be made with misunderstandings
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Decisions are based on?
Rational reasing, heuristic based reasoning, emotions, and the context needs
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Normative views?
How people should make decisions
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Utility theory?
Notion of maximising utility (value), and assumed that when evaluating choices we use logic, probability and statistics. Assess the expected value and maximise the utility by choosing option with highest expected utility
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Descriptive views?
Assume people use simplifying heuristics, resulting in systematic biases and errors
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Prospect theory?
Two processes: editing (outcomes are weighed and lesser outcomes considered losses,m higher ones considered gains). Evaluation (compute value based on perceived outcomes are choose higher utility)
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Emotional factors?
De Martino (2006): associated with anxiety, make worse decisions. Seo and Barrett (2007): online investors who experienced more intense feelings had superior decision making
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Other cards in this set

Card 2

Front

Probabilistic judgement?

Back

Relative probabibilities (of hypothesis after data), prior odds (after data obtained) and likelihood ratio (based on which of two is more likely)

Card 3

Front

Taxi cab problem?

Card 4

Front

Taxi cab problem solution?

Card 5

Front

Neglecting base rates?