judgment, Decisions, and Reasoning

Are humans rational decision makers? Be able to provide evidence to support your

Response.

Not always.

People rely on heuristics (mental shortcuts) → fast but error-prone

What is anchoring?

Relying too heavily on an initial value (anchor) when making decisions

Example: Seeing a high original price makes a sale price seem better

What is the illusion of superiority?

thinking you're better than average

Dunning-Kruger effect

people with low ability overestimate their competence, while experts are more accurate

ex. A student takes a test they didn't study for:

They think: "That was easy—I probably got an A."

But they actually score poorly

What is a framing effect, and how can it bias decision making?

Framing effect → decisions change based on how information is presented

Ex.

Frame 1 (positive): "This surgery has a 90% survival rate."

Frame 2 (negative): "This surgery has a 10% mortality rate."

Preference reversal;

is when a person's choice between two options changes depending on how they are asked to evaluate them—even though the options themselves stay the same.

ex. In other words, you might say you prefer A over B in one situation, but then assign a higher value to B in another situation.

• What is the endowment effect? How did studies like Kahneman et al. (1990)

demonstrate how this effect affects decision making?

We value things more once we own them

Study:

Daniel Kahneman et al. (1990):

People demanded more money to sell a mug than they would pay to buy it

What is a heuristic? Why do we often rely on heuristics when making decisions?

a mental shortcut or rule of thumb that helps people make decisions quickly without having to think through every detail.

What is confirmation bias?

the tendency to seek out, interpret, and remember information that supports what you already believe, while ignoring or downplaying information that contradicts it.

Ex; If you think a person is unfriendly:

You'll focus on moments when they seem rude

You might overlook times when they're actually kind

What is the representativeness heuristic?

a mental shortcut where people judge the likelihood of something based on how much it resembles (or is "representative" of) a typical case, rather than using actual probabilities.

ex. Then they were asked which is more likely based off a discription :

Linda is a bank teller

Linda is a bank teller and active in the feminist movement

What is the availability heuristic?

a mental shortcut where people judge how likely something is based on how easily examples come to mind.

If something is easy to remember, we assume it must be common or likely, even if it isn't.

ex. They gave people questions like:

Are there more English words that start with the letter "K" OR

More words where "K" is the third letter?

👉 Most people said more words start with "K"

But in reality, there are more words with "K" as the third letter.

What is the gambler's fallacy?

Belief that past random events affect future ones

Ex. At a casino roulette table:

The ball lands on red several times in a row

A player bets on black, thinking it's more likely now