Reasoning and Decision Making - Lecture 2

Utility Theory

assumes you make decisions to maximise gains/minimise loss.

expected utility = value of outcome × probability of outcome

does not account for psychology - a definite is worth more than a probable.

Tversky & Shafir (1992) - Loss Aversion

expect losses to reduce happiness more than equal gains will increase happiness.

coin toss - get £200 heads, give £100 tails.

utility theory predicts you should take the bet (£50 gain), but 66% participants refused bet.

Dawes et al. (1988) - Sunk-Cost Effect

e.g. buy £100 ticket - lose the ticket, have money to buy a new one. most buy another - continue endeavor once investment has been made in money, effort time.

outside of predictions of utility theory.

Tversky & Kahneman (1981) - Asian Disease Problem

demonstrates framing effect. same decision framed differently results in either risk seeking or risk adverse decisions.

when scenario described more clearly, effect disappears (Mandel & Vartanian, 2001).

cancer treatments - patients list pros/cons and justify decision = framing effect disappeared (Almashat et al., 2008).

Prospect Theory (Kahneman & Tversky, 1979)

attempt to explain loss aversion - two key assertions:

• people identify reference point (losses/gains intersect value) that represents current state

• people more sensitive to potential losses than gains

Kermer et al. (2006)

Ps given $5 - coin toss, heads = win $5, tails = lose $3.

Ps estimate feelings if win or lose, rate afterwards actual feelings.

good at estimating feelings after win, overestimated x4 bad feelings after loss.

Prospect Theory - Cons

• doesn’t explain why we are loss averse

• ignores emotional factors in decision making

• ignores individual differences in willingness to make risky decisions

Current Motivational State

Affective forecasting - bad at predicting future state and needs e.g. more likely to buy junk food when hungry (Read & van Leeuwen, 1998).

think of future self more as another person - seen in anterior cingulate cortex during fMRI (Ersner-Hershfield et al., 2009).

feelings alter gambling behaviour - optimistic gambles when happy; systematic bias in line with current feelings (Bower, 1981).

Anticipatory Arousal

use gut feelings as objective info - it isn’t = affect-as-information theory.

uncertainty/novelty increases arousal = can have great influence on decisions (Srull, 1983).

(Goldberg et al., 1999) - watch film - criminal either did or didn’t get punished. Ps asked to give judgement on diff. case. Group 2 increased punishment.

Omission Bias

preference for inaction when engaged in a risky decision due to overestimating future regret.

Wroe et al. (2005) - parents anticipate greater responsibility/regret if child experiences adverse reaction to vaccine

Shiv et al. (2005)

15 emotion region damage patients, 7 non-emotion region damage patients. investment coin toss - lose $1 or win $2.50

emotion damage invest over 20% more than neurotypical and non-emotion damage.

lesions to emotion areas removes loss aversion = better decisions.

Damasio et al. (1999)

7 patients with damage to ventromedial PFC (emotional regulation, decision-making).

cognitively normal, but impulsive, rude and violent.

make risky and emotion-based decisions.

Somatic Marker Hypothesis

make decisions based on past experiences’ related emotional experiences.

retrieved emotion includes peripheral arousal (somatic marker) - somatic markers biases decision-making. fast, adaptive, limited resources needed.

Individual Differences - Gambling in Parkinson’s Patients

~14% patients develop gambling problems/impulsive behaviours due to medications.

Ray et al. (2012) - gambling problems due to disruptions of dopamine function in PFC and other areas involved in impulsivity.

Reciprocity - Strohmetz et al. (2002)

adding sweets with bill increases tip%.

people feel need to justify costs (reduce dissonance). more sweets → more tip → more positive evaluation to reduce dissonance.

Justification (Tversky & Shafir, 1992)

took tough exam, burnt out - passed, failed, or unknown

chance to buy package holiday to Hawaii:

passed = 54% buy as reward

failed = 57% buy as consolidation

unknown = 32% buy - reluctant as could not justify purchase easily.