MGTC20 Final.docx

21 Pages
Unlock Document

University of Toronto Scarborough
Management (MGM)
Bill Mc Conkey

SECTION 4 HEURISTICSBIASES CHAPTER 10THE REPRESENTATIVENESS HEURISTICHeuristicsGeneral rules of thumb Shortcuts can yield very close approximation to the optimal answers but can also lead to predictable biasesinconsistenciesWill focus on 2 related issues o process by which decision makers reach their conclusionso the biases that can result as a consequence of these processesAdvantages Reduce timeeffort required to make reasonably good judgmentsdecisionsDisadvantagemay lead to systematic biases The ABCs of RepresentativenessPpl often judge probabilities by the degree to which A is representative of B Degree that A resembles B o Called the Irepresentativeness Heuristic o EgA is a person B is a group if trying to estimate prob that A came from B o EgA is an eventeffect six heads in a row B is processcause flipping coinTextbook exampleLinda is concerned w issues of discriminationsocial justice o Alternatives 1 Bank teller 2 Bank telleractive in feminist movement o 90 believed she was a bank telleractive in the feminist movement o Most ppl believe the more specific event is more probable than a general event o Violates fundamental rule of probabilityConjunction FallacyConjunctionCooccurrence of 2 events CANNOT be more likely than the prob of either event aloneTverskyKahneman concluded as the amt of detail in the scenario increases its prob can only decrease steadily but it representativenesshence its apparent likelihood increaseThe reliance on representativeness is a primary reason for the unwarranted appeal of detailed scenariosthe illusionary sense of insight that constructions provideSpec scenarios appear more likely bc they are more representative of how we imagine particular eventsThe Law of Small NumbersThe Law of Small NumbersBelief that random samples of a population will resemble each otherthe population more closely than statistical sampling theory would predict o Reference to a law in stats known as the law of large numbers larger a sample you draw from the population the closer its average will be to the population averageEgIf ppl are asked to write down a random sequence of coin tosses wo flipping a coin they often try to make the string look random at every point called Local representativenessEgmean IQ100 First child of 50 tested has IQ of 150 What do you expect mean IQ to be o Answer101 o Most ppl will say 100 bc they think there will be low IQ scores to balance out the high score of 150 This assumes that chance is selfcorrecting However chance is not self correctingit does not cancel outcorrect high scores It merely dilutes high scores w other scores that are closer to the avgTendency to view chance as selfcorrecting is an example of a bias resulting from the representativeness heuristic bc samples are expected to be highly representative of their parent populationGamblers fallacybelief that a successful outcome is due after a run of bad luck belief that independent trials w the same outcome will soon be followed by an opposite outcomealso caused by representative heuristic 1The Hot HandDemonstration of the law of small numbersHot Hand aka streak shooterplayer who has a better chance of making a basket after one or more successful shots than after missing a shot Truth is chances of making next basket were not significantly diff from the players overall probability of making a basket ExperimentSubjects viewed six diff series of XsOs Each series contained 11 Xs and 10 Osthe prob of alternating bw the two letters was set from 0409 o Subjects selected the 0708 sequences as the best examples of a chance series rather than selecting the 05 sequence o 62 classified the 05 sequence as streak shootingNeglecting Base RatesA reliance on representativeness can lead ppl to ignore base rate info relative freq w which an event occursWhen asked to rate the chance of a randomly selected person being an engineer they used the base rate 30When given descriptive info even uninformative info they tended to ignore the base rates 50 if no concrete info was givenPpl often use base rate info when it is consistent w their intuitive theories of causeeffect eg Number of hours studying week vs weekly incomeNonregressive PredictionPpl tend to neglect the diagnosticity of the info on which they base their predictionas a result make nonregressive predictionsRegression to the meanstat phenomenon in which highlow scores tend to be followed by more avg scoresEgScores on test are moderately related to GPA What GPA would you predict for student who scored 725 o Most students predict 3537 The best prediction lies bw 25avg36Most psychologists think of test scores as being made up of two independent components o True Scorewhat student would score if test were perfect measure of ability o Errorresult of all factors that have nothing to do with ability sleep lightetcIn most cases these factors tend to cancel each other out Occasionally they combine to dramatically increase or decrease a test score In future test scores are likely to regress toward the true scoreTendency to overlook regression can lead to critical errors in judgment o Mislabeling of simple regression phenomena extremely goodbad performances followed by less extreme performances egsports illustrated jinxClinical vs Actuarial PredictionAccuracy of actuarial predictions based solely on empirical relations bw a given set of variablesan outcome is equal to or better than the accuracy of clinical predictions based on the judgment of human beings o Predictions are more accurate when they are not made by a human decision maker2
More Less

Related notes for MGMD02H3

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.