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PSYC 2265 (23)
Dave Cann (23)
Lecture 23

PSYC 2265 Lecture 23: PSYC 2265 – Lecture 23 Notes – Decision Making

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PSYC 2265
Dave Cann

PSYC 2265 – Lecture 23 Notes – Decision Making Approaches to Decision Making • Error analysis provides a window to the underlying cognitive processes • Normative approach o How we ought to think o Expected utility theory ➢ When faced with uncertain choice, we base our decisions on two factors: ▪ The expected utility of the outcomes (something good) ▪ The respective probability of each outcome ▪ Essentially, this is a cost/benefit analysis • Descriptive approach o How we actually do think o Prospect theory ➢ Gains and losses are valued based on the current situation, and not based on expected utility of the decision ➢ Predicts that preferences will change based on what we have at the moment ▪ If we expect a gain, we act in a risk aversive manner ▪ If we expect a loss, we act in a risk prone manner The Framing Effect • Demonstrates that the outcome of a decision can be influenced by two factors o The background context of the choice o The way in which a question is worded (framed) Heuristics Influencing Decision Making • Representativeness o Based on a judgment of similarity o Judge probability of an event based on how it matches a stereotype o Can be accurate but can also lead to errors o Most will overuse representativeness o This happens because we ignore base rates ➢ Base rate information is the actual probability of an event ➢ Much research in the 1970s & 1980s seemed to indicate that base rate information in these types of problems were ignored ➢ Current research focuses on when participants do pay attention to base rates ➢ Koehler (1996) found that base rates are used when ▪ Problems are written in ways that sensitize decision-makers to the base rate ▪ Problems are conceptualized in relative frequency terms ▪ Problems contain cues to base rate diagnosticity o Conjunction fallacy o Misperception of event clusters ➢ The mistaken belief that a random event is affected by previous random events
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