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JDM Psych Final

Counterfactuals Judging outcomes based on how close they were to a different outcome.
Hot-Cold Empathy Gap “Hot” and “cold” states refer to different times and how that affects our temptation. When we are in a “cold” state, we don’t know how our “hot” state will impact us.
The power of Incentives people work harder but not smarter; incentives don’t work when your System 1 is failing on the basis of heuristics. Ideas that we just have to increase incentives to increase performance (policy-wise) therefore does not make sense.
Intention-Action Tension You can increase someone’s intention of doing something, without actually increasing their likelihood of actually doing it.
Psychological Taxes and Subsidies A benefit or drawback that does not display itself in economic or monetary terms. When people feel psychologically better or worse for having done a certain action.
Inside View method of planning that focuses on the case at hand, and is subject to heuristics including representativeness, and ignorance of base rates. It is the more intuitive and persuasive approach, but it often leads to flaws and overoptimism.
Outside View method of planning that involves looking at similar cases and comparing the current case to those, using statistics. There is less room for wishful thinking, and less potential for overoptimism.
Planning Fallacy contributes to overoptimism; people think they are capable of completing their plans well and quickly, when in reality that is likely not the case.
Cash Equivalent The sure amount that has the same utility as the gamble (it is less than the utility of the expected value because we are risk averse).
Isolation Effect we focus on isolated losses and gains rather than final states of wealth. This is one of the two CORE parts of Prospect Theory.
Decision Weights non-linear weighting of probability; it is one’s subjective perception of probabilities. This is another CORE of Prospect Theory. They are unstable near end points.
Rational Agent Model Assumes that people behave according to rational basis. They are econs, with stable preferences. Well-intentioned, well-informed, profit maximizing.
Behavioral View – Research-based Unstable preferences, mediocre judgment. They are satisficing (i.e. not maximizing). Local decisions, context dependent. They are susceptible to heuristics. Choice is between choices as interpreted and represented by your brain.
Intuitive View Based in folk beliefs. Tries to get away from a rational-agent model, but it is not scientific.
Normative Analysis Analysis based in an idealized version of what we think people are like.
Descriptive Analysis Psychological, empirical. This is how we actually are limited – doesn’t try to correct for them. It is just doing studies to figure out how people behave.
Proscriptive Analysis Recognizes the cognitive/emotional limitations and tries to still give choices but nudge people in the right direction. Libertarian paternalism.
Central Route • Method of decision-making that relies on System 2. • You stop and think about the logic, generate positive and negative arguments, etc. • This is a slow, deliberative, logical route.
Peripheral Route • Method of decision-making that relies on System 1 • You basically generate some light response based on associations, believability, etc. • This is a “light” analysis.
Bias Belief Effect • If your System 1 and System 2 thought processes come into conflict, then you are less likely to correctly evaluate the situation. • Valid arguments and unbelievable conclusions, and invalid arguments and believable conclusions
Boundary Conditions the specific situations in which things work and don’t work – or in which we are unable to interpret them.
Inattentional Blindness to Obvious Information you don’t see obvious things when you are focusing on something else.
Change Blindness If you are focused on one thing, you don’t notice when something else in your view changes. Example of holding a basketball while asking for directions – you don’t notice when the basketball is gone.
Tendency to Focus on Only Part of the Situation this is why we overestimate the extent to which positive or negative events will impact our lives.
Reference Group Neglect People are insensitive to the quality of their competition.
System Neglect People undervalue the importance of the general context in which people are making decisions.
Pluralistic Ignorance When you ignore something because others around you do. Example: the smoke filled room – you won’t move if others don’t.
Elaboration Likelihood Model Increased cognitive load renders us more susceptible to biases. This is because our ability and motivation to “elaborate” (i.e. think about things more carefully & use system 2) is low as a result of the ELM.
Representativeness Heuristic You substitute similarity for probability.
Availability Heuristic Assessments based on ease with which something comes to mind.
Anchoring When you have an idea placed into your head, even if it is entirely unrelated or not deliberate, you use that number as an anchor.
Affect Heuristic The emotion that something generates is a predictor for how much you value it.
Ease of Recall How easy or difficult it is to bring something to memory affects your view of its probability (related to availability heuristic).
Heuristic an intuitive procedure or strategy, whether deliberate or not, that relies on a natural assessment to reduce a complex task
Bias a systematic and predictable failure of a heuristic
Insensitivity to Base Rates people ignore base rates in many situations; example: false positives on disease exams make those exams not as bad if you get a positive
Insensitivity to Sample Size people don't account for small sample sizes in studies
Misconceptions of Chance Believing that independent events with independent probabilities are interrelated
Regression to the Mean an exceptionally good performance is likely to be followed by a bad one because people regress to the mean on the aggregate (dispels myth of "hot hands"
Conjunction Fallacy relates to representativeness heuristic; someone should not be more likely to be AandB than to just be A, but we do that all the time
Confirmation Trap/Confirmatory Hypothesis Testing we look for information to support our hypothesis, and we are more likely to accept information that supports our hypothesis
Conjunctive-Disjunctive Events we overestimate the probability that all things in a chain of events will go right; we underestimate the probability that something will go wrong
Hindsight Bias and the Curse of Knowledge people code wrong predictions as "near misses" or successes because they feel like they would have known that; it is even worse for so-called "experts" because they find more reasons to code failures as successes
Durability Bias people overestimate the time that they will feel sad about a negative change in their life
Choice Architect the person responsible for constructing the status quo options/the context in which people make decisions
Libertarian Paternalism influencing people's choices in a way that will make the chooser "better off" but is still "liberty-preserving"
Status Quo Bias people will generally stick with the status quo -- this is related to prospect theory because they are loss averse and focus on the negatives of switching rather than the positives; it is also just inertia in some situations as well
Framing Effects related to prospect theory - framing decisions in either gains or losses will affect the decisions people make in non-transitive ways
Law of Contagion people think that once something is in contact with a contaminant it will always remain contaminated
Law of Similarity causes resemble their effects or appearance equals reality (law of sympathetic/magical thinking)
Law of Opposites causes are opposite of their effects (law of sympathetic/magical thinking)
Focusing Illusion in anticipating future events, people focus disproportionately on, and exaggerate the importance of things that would change, and ignore things that would stay the same
Planning Fallacy when people are overoptimistic about their goals to complete a project (can result from taking the Inside View)
Signal Detection Theory picking out the right variable to partition your base rates - you will either have a lot of false positives or a lot of false negatives; you have to figure out which one is more important for you to minimize
Mere Exposure merely being exposed to something increases the likelihood that you will like it
Implicit Memory memories can be supplanted or influenced by the way questions are asked; our memory is malleable
Rosy Review if you make a good choice, you are more likely to think that choice is good after the fact when looking back
Flashbulb Memory the memory of a specific time because of a major or traumatic event that happened then; however it is often wrong!
Theory Maintenance and Theory Change when people have a theory and are presented with new evidence, they take the parts of the evidence that support their theory; when they are presented with a refutation, they find ways to poke holes in that logic
Psychological Taxes and Subsidies the (positive and negative) feelings that doing certain things produce; they are often more powerful than economic taxes and subsidies, and can be overcome by economic taxes and subsidies
Acquisition Utility the experiential utility gained; purchasing a beer if you are really thirsty
Transaction Utility the utility gained from getting a good deal (monetary, for instance) on something
Ego Depletion we have a limited amount of self-control, and we use it like a muscle
Subjective Construal everything people do is relative to their interpretations of their past experiences
Immune Neglect you ignore the effects of your psychological immune system when making predictions (i.e. you think you are going to feel really bad after failing a test, but you actually don't feel that bad because your psychological immune system kicks in)
Cognitive Dissonance we try to make up for inconsistencies between thoughts and actions by changing our thoughts (ex. you convince yourself that a really boring task you did was interesting to make up for the fact that you did it)
Hyperbolic Discounting discounting future time at an extreme rate - leads to things like procrastination
Preference Reversal conflict between what you feel you should do and what you want to do
Self-Fulfilling Prophecy example: kids who are told that they are smart (put into the smart class) are more likely to perform better in school than kids that are told that they are dumb
Priming showing someone something in order to get them to like it more or to recognize it later; it can happen even for a very short period of time
Endowment Effect people underweigh opportunity costs as compared with out of pocket expenses; once people have something, they value it more because they are loss averse and focus on the disadvantages of losing it
Reference Point base monetary state; it often changes
Loss Aversion people try to avoid losses because losses hurt more than gains feel good
Decisional Conflict if decisions are difficult, you are more likely to try and search for another option; also, if there are more choices you are more likely to want to stick with the status quo
Choice Overload the more choices you have, the less likely you are going to be to want to choose any of them
Regret Avoidance individuals voluntarily restrict their choices in order to prevent feeling bad about having to pass on choices
3 Types of General Accounts in Mental Accounting 1. Current Income Account 2. Asset Account 3. Future Income Account
Disposition Effect people are more likely to sell winning stocks than losing stocks because of the reflection effect
Dynamic Inconsistency Choices about compounding are affected by temporal differences; 1 apple today or 2 apples tomorrow (you choose option 1); but 1 apple in 10 days or 2 apples in 11 days (you choose option 2)
Decoy Effect adding another, slightly different option to a binary conflict should not change the initial choice -- but it does
Magnitude Effects the size of the reward will affect which mental account it will go into; small rewards go into current income account, larger rewards go into asset accounts
The Power of Suggestion/Preference Malleability asking people how often they floss their teeth makes them floss more
Duration Neglect people don't focus on duration, just that the event happened - this relates to remembered vs. actual enjoyment
Extension Neglect insensitivity to scale; people don't focus on the number of something sad, just that there is something sad; the number at which people stop caring about the number is 2
Myopia focus on the short-term rather than the longer-term outlook
Overweighting Low Probabilities; Underweighting High probabilities lotteries: we are more likely to want to participate in a pool with a higher reward but a lower probability of success than a lower reward with a higher probability of success
Integrative Negotiations simple, zero sum game
Distributive Negotiations not a zero sum game - multiple people can benefit - there is option of parateo-optimality
BATNA Best Alternative to a Negotiated Agreement
Aspiration Value an educated target of what would be a really good outcome
High Discount Rate instant gratification, value getting things NOW a lot more than later
Low Discount Rate more patient in waiting for better outcomes
Things To Do in a Negotiation know your BATNA, be prepared, know that not all gains are monetary, think of ways of asking questions as hypotheticals, trade on issues to create value, show flexibility by making multiple offers simultaneously
Things NOT to Do in a Negotiation don't decide on dealbreakers before going on, don't reveal your card, don't reveal your BATNA
Positive bargaining zone set of resolutions that both parties prefer over impasse
Post-Settlement Settlements you can keep negotiating, but if you fail to reach an additional negotiation point, then you can fall back on the settlement you originally agreed upon
Contingent Contracts if one person thinks an idea is really good and the other one isn't so sure, you can design a contract where the confident person only benefits if it makes beyond a certain amount of money
Intention-Action Tension you can increase someone's intention of doing something without actually increasing their likelihood of doing it; people can want to do it, but don't - you have to target behaviors through choice architecture
Negative bargaining zone no settlement exists that is acceptable to both parties
Bootstrapping combining clinical and actuarial judgment in an effective way
Schema structures for reference; core and compact, simple ideas stick
Hedonic Framing method of evaluating joint outcomes to maximize utility. In order to do that you segregate gains and integrate losses
Conflict of Choice violates context independence; when there are more options, it is harder to decide what you want so people are more likely to choose nothing, or to choose something that they would not have chosen if there were fewer choices; triage examples
Channel Factors things that seem trivial, but can have a profound effect on construal and subsequent behavior (example: putting people in banks to help customers who come in)
Nash Equilibrium each person's choice is the best response to the other person's choice in a prisoner dilemma game
Created by: eldar