PSYB10H3 Lecture Notes - Lecture 3: Forego, Hindsight Bias, Observational Error

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Published on 17 May 2016
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LEC 03: Heuristics and Biases
Deciding Well
- Decisions are easier when we can predict the future.
- We can best predict the future by making sound inferences.
- When we are designing better ways to make judgments and decisions, we have to understand
which errors people typically make.
Heuristics – mental shortcuts/rules of thumb for making judgments
- Heuristics save time
- Heuristics are “good enough” much of the time
- Heuristics are prone to systematic error
Common heuristic: Availability Heuristic
- We are more likely to overestimate the likelihood, frequency, and causal impact of things that:
oHave Come To Mind Frequently or Recently
Ex. Insanity plea in murder trials – most think it is used a lot, but actually used
less than 1% of the time. It comes to mind because you see it on TV
Ex. Apple's distinct headphones make it easy to keep the image in your head
Ex. Economic Decisions
Hearing only about lots of people getting rich by investing in real estate
makes it seem impossible for real estate values to decline.
Hearing only about the economy getting worse may make the economy
get worse (by, for example, encouraging businesses to cut costs and
forego risks).
oAre The Focus Of Our Attention
Ex. Things listed in front of you are what you pay more attention to rather than
'other' that is not in front of you
oSpring Easily To Mind
Anchoring – people’s estimates of unknown quantities are easily biased by what values they consider
even when those values are obviously arbitrary and irrelevant. (ex. First offers in an auction)
Why are anchors effective?
- They are sometimes believed to be informative – to signal that the true answer is close by.
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Document Summary

Decisions are easier when we can predict the future. We can best predict the future by making sound inferences. When we are designing better ways to make judgments and decisions, we have to understand which errors people typically make. Heuristics mental shortcuts/rules of thumb for making judgments. Heuristics are good enough much of the time. We are more likely to overestimate the likelihood, frequency, and causal impact of things that: have come to mind frequently or recently. Insanity plea in murder trials most think it is used a lot, but actually used less than 1% of the time. It comes to mind because you see it on tv. Apple"s distinct headphones make it easy to keep the image in your head. Hearing only about lots of people getting rich by investing in real estate makes it seem impossible for real estate values to decline.

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