Chapter 13: Judgement

Reference: "Cognitive Psychology Connecting mind, Research and Everyday experience" Goldstein, E.B. (2019)

judgements

estimates that people make of important real-world quantities

judgement heuristics

easy, natural strategies for making judgements

T or F: Availability = Probability

F

conjunction fallacy

people judge the conjunct as more probable

law of large numbers

larger sample provides stronger evidence than smaller ones

base rate

probability of an event in the absence of any evidence

T or F: People often ignore the event’s base rate when estimating the probability of an event given evidence

T, this is known as base rate neglect

Why do people ignore base rates?

Causal relevance of base rates is unclear & people are not good at reasoning with probabilities versus frequencies

cognitive illusions

consistent and persistent discrepancies between a true state of affairs and its mental representation

confirmation bias

an unconscious tendency to process information in a way that supports one's prior beliefs or values

myside bias

type of confirmation bias where people tend to discount evidence that they disagree with

backfire effect

when disconfirming evidence sometimes leads to a mistaken belief becoming stronger

People (including scientists!) are often biased in how they…

Test hypotheses & evaluate evidence (tend to look for positive confirming evidence & more critical of evidence they don’t agree with)

decision making

choosing among a set of alternatives

uncertainty

having an idea of a choice’s likely outcome, but you don’t know for certain

expected value theory (evt)

first computing the expected value of each alternative. then choosing the alternative of the highest expected value (the normative theory of decision making)

lotteries

a decision that involves something of value (often money)

decision trees

represents all possible actions & expected value associated with each

risk aversion

when people prefer an option with a lower expected value if it is less risky

T or F: One reason people violate EVT is that their subjective utility usually differs from objective wealth.

T, utility is what people personally value

expected utility theory (eut)

a theory in which decisions are made on the basis of utility rather than value

diminishing marginal utility

people value each additional unit of wealth a little bit less

T or F: Expected utility theory (eut) is a less plausible theory of decision making than expected value theory (evt)

F

loss aversion

magnitude of the pain of a loss is greater than the magnitude of the pleasure of a gain

risk aversion strategy

decision-making strategy that is governed by the idea of avoiding risk; often used when a problem is stated in terms of gains

risk taking strategy

decision-making strategy that is governed by the idea of taking risks; often used when a problem is stated in terms of losses

certainty effects

alternatives with a certain outcome are evaluated differently than those with uncertain outcomes

framing effects

people’s choices change depending on how they are worded

prospect theory

composed of two components: a new utility function and a function mapping objective to subjective probabilities

order these theories from best to worst: Expected Utility Theory (EUT), Prospect Theory (PT), Expected Value Theory (EVT)

PT > EUT > EVT

weighted additive

a good strategy that systematically considers all the information on all the dimensions

what is a con of the “weighted additive” strategy?

it’s computations can be time consuming and laborious

bounded rationality

the principle that one should take into account the cost of making a decision

in what situation would bounded rationality be good for?

when time and efficiency are critical

lexicographic strategy

one ranks the dimensions in order of importance. then for each dimension, eliminate all but the best on that dimension

what would lexicographic strategy be good for?

yielding a reasonable, but not the best choice

satisficing

a strategy where one defines what a satisfactory alternative would be & then keeps looking until one is found

T or F: EVT explains decisions EUT can’t

F

T or F: PT explains decisions that EUT can’t

T