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Focused thinking.docx

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Department
Psychology
Course
Psychology 3190F/G
Professor
Tony Vernon
Semester
Fall

Description
Focused thinking is a process from moving to the current state to the goal state What is good decision making? - Always make the best choice -> given a set of outcomes we should choose the highest value - Make the best choice regardless of how the alternatives are described (the best choice is the best choice no matter how the choices are phrased) Ways of Studying Decision making - Descriptive: ‘what you do’ - Prescriptive: ‘what you should do’ What is an optimal decision? Rational or Normative Model -> humans are capable of estimating the objective probability of each outcome, and choose the one which is optimal, says we are perfect at estimating probability - Expected Value (certain monetary benefit) - Expected Utility (non-monetary benefit) Prospect Theory: probability that people estimate is psychological or subjective, says we are not perfect at estimating probability. Rational Model: Expected Value People set a value for all the alternative and choose the most valuable Options: A: Winning $100 with probability 0.10 / else nothing = $10 B: Winning $8 with probability 0.90 / else nothing = $7.20 A has biggest value Rational Model: Expected Utility Outcomes depend on goals, not value Options: A: Winning $100 with probability 0.10 / else nothing = $10 B: Winning $8 with probability 0.90 / else nothing = $7.20 B has higher likelihood Violations of Rational Decision Making - Certainty effect - Preference reversals - Framing effects - Heuristics and biases Certainty Effects - Winning $40 with probability 0.80 o EV= $32 - Winning $30 with probability 1.00 o EV = $30 - People choose option B, an immediate gain Preference Reversal (same choices are offered in different forms) If individuals have sufficient time and information, they make choices that maximize their interests, which should be stable. - Buy shoes in Store A or in Store B Situation 1: Store A: $15 or Store B: $10, some will go to B for a significant difference Situation 2: Store A: $150, Store B: $145, but preference is reversed in situations because percentage wise it is not much of a difference Framing Effects - Decision making depends on how the problem is framed (as a loss or as a gain) - Participants are risk-averse of gains and risk-seeking for losses Framing: Positive: Treatment A will save 200 lives, or treatment B is a 33% chance of saving al 600 people, 66% possibility of saving no one (people prefer Option A) Negative: Treatment A states that 400 people will die, or treatment B is a 33% chance that no people will die, and a 66% probability that all 600 will die. (people prefer Option B) Heuristics and Biases - Mental shortcuts that are easy to acquire and implement, drawback is that it may not work - Algorithm: step by step instructions on how to reach a goal, and they will always work if done correctly, but may be computationally complex and not always avaiable - Kahneman and Tversky - Confirmation Bias - Overconfidence - Availability Heuristics - Representativeness Heuristics Biases - Confirmation Bias: failure to seek disconfirming evidence
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