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PSC100 CH9
Judgment and Decision Making
Term | Definition |
---|---|
psychological bias | psychological factors affect our decision making , making us irrational times |
predictably irrational | our errors are systematic and reliable |
thinking fast (system 1) | decision making that operates quicly, with effort and less control |
thinking slow (system 2) | decision making that operates more slowly, with more effort and more deliberate control |
heuristics | mental shortcuts we take as part of thinking fast (system 1) |
prior probabilities | probability of an event before new data is collected |
representativeness heuristic | mental shortcut used to estimate the likelihood of an event based on how closely it matches or represents related examples or stereotypes |
conjunction fallacy | the false assumption that a combination of conditions is more likely than either condition by itself |
law of sample size | smaller sample sizes produce more variance |
gambler's fallacy | faulty reasoning that past events in a sequence affect the likelihood of future events |
hot-hand effect | perception of being "on a roll" |
proportionality bias | big consequences are always the result of the big causes |
availability heuristic (bias) | people estimate the frequency of an event based on how easily examples come to mind |
anchoring | how different starting points (initial values) produce different estimates or decisions |
recognition heurisitc | placing higher value on an alternative that is recognizable versus novel (eg. bad press is better than none) |
fluency heuristic | placing higher value to an option that is recognized most quickly and easily |
one-clever-cue heuristic | uses a single cue to decide (eg. pick closest coffee shop) |
fast-and-frugal search | use a small set of yes/no questions rather than a larger set of probabilistic cues |
take-the-best-cue heuristic | involves considering each cue serially and is a type of fast and frugal heuristic |
tallying | counting the number of cues that favor one alternative over another |
subjective utility | satisfaction obtained from a choice |
risk | probability of a negative outcome |
rational choice theory | we make rational, utility-maximizing decisions |
prospect theory | people treat the same dollar loss as psychologically larger than the same dollar gain |
loss aversion | people hate losses more than they enjoy equivalent gains; people tend to prefer a sure gain over risky gains |
risk aversive | people would rather take a sure gain than a risky option for slightly more money |
risk seeking | people are willing to lose more if the bet allows them a small chance of avoiding any loss |
status quo bias | preference for the current state of affairs |
transaction costs | time, effort, and resources needed for change |
optimal defaults | automatically place people into options that have the greatest benefits |
endowment effect | tendency to overvalue what one already has (ppl attach a premium to what they own or already know) |
sunk cost effect | tendency to continue a task once time, energy, and resources have been invested (which makes people lost more) |