Reasoning and Decision Making - Lecture 2

Decision

choosing from 1+ options - involves judgement = calculating likelihood of events using incomplete information.

Utility Theory

assumes you make decisions to maximise gains/minimise loss.

expected utility = value of outcome × probability of outcome

does not account for psychology - Post et al. (2008) - decisions in Deal or No Deal based on amount of money left and previous events.

a definite is worth more than a probable.

Tversky & Shafir (1992) - Loss Aversion

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

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

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

e.g. buy £100 ticket to see band - 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; 1984)

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)

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

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 (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’ 1984).

Unaccounted Arousal (Goldberg et al., 1999)

• Ps watch crime film - criminal either gets punished (G1), or doesn’t (G2).

• Ps asked judgement on different case.

• G2 Ps significantly increased punishment on unrelated case.

misattribute unaccounted arousal onto unrelated case.

Omission Bias

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

role of regret:

• Brown et al. (2010) - parents accept higher risk of disease in child than adverse reaction to vaccine

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

Shiv et al. (2005)

15 emotion region damage patients, 7 non-emotion region damage patients. investment coin toss

• neurotypical = invest 58% of time

• non-emotion damage = invest 61%

• emotion damage = invest 84%

lesions to emotion areas removes loss aversion = better decisions.

Damasio et al. (1999)

7 patients with damage to ventromedial prefrontal cortex (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 - Rogers Decision Making Task

abstinent drug users v non-users - gamble points on which box contains ring.

users made more risky decisions - risky decisions increased with amount gambled.

negative correlation between risky decisions and anterior cingulate cortex (ACC) - users showed reduced responses in ACC.

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.

Complex Decision Making - Multi-Attribute Theory (Wright, 1984)

identify attributes relevant to discussion. decide how to weight attributes.

list all options under consideration. rate each option on each attribute.

obtain total utility by summing weighted values. selected one with highest value.

but we do not make rational decisions!

Complex Decision Making - Elimination-by-aspects Theory (Tversky et al., 1972)

eliminate options based on specific criteria until one option remains. trade-offs matter.

Kaplan et al. (2011):

1. elimination as above

2. detailed comparison of remaining smaller number (utility theory)

supported by Payne (1976) - uni students use elimination-by-aspects for large numbers, multi-attribute utility for smaller numbers.

Complex Decision Making - Memory Guided Decision Making

uses past experience to make rapid decisions under pressure - often used by experts.

Klein (1998) - elimination-by-aspects more common for non-experts. experts retrieve similar situation and evaluate if previous decision is appropriate.

Problem Recognition

first step to consumer decision making - recognising there is a gap in what you have and what you want/need.

gaps in need and wants influenced by social factors, lifestyle factors, and advertisements.

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)

1. took tough exam, burnt out, passed

2. “ failed

3. “ 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.

Environment

• music - calms to buy more food/spend longer in shop

• lack of windows/clocks to make less aware of time spent

• use specific lighting to flatter produce more

• smaller, raised tiles to slow people, spend longer in aisles.