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Chapter 13

Chapter 13-part II.doc

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Judith Shedden

Chapter 13: Reasoning (page 455 onwards) - Reasoning about choices - Choices fill our lives, leading us to ask, how do people make decisions? Utility Theory - We use values and goals in making decisions - Each decision will have certain costs attached to it o In deciding we weigh the costs against the benefits and seek a path that will minimize the former and maximize the latter o Trade-offs usually involve factors that are highly disparate o It’s like comparing apples versus oranges – the values at stake seem incommensurable - However, we do make comparisons to make choices o We compare by asking how important each factor is to us o This is expressed as the subjective utility of each factor (the value of the factor to us) o These utilities can be summed to evaluate the overall utility of each outcome, with the goal of selecting the option with the greatest overall utility - Most choices involve a degree of uncertainty or risk o Von Neumann and Morgenstern provides one way to think about these risks o One calculates the expected value of each option using this equation: o Expected value = (probability of particular outcome) x (utility of the outcome) - In making choices, we seek to maximize utility – that is, to gain as much as we can of those things we value, and to avoid those things that we don’t like - There is no connection between seeking to maximize utilities and being greedy or materialistic (you could value leisure or happiness, or a reduction of world hunger, etc) Framing of Outcomes - Many choices and decisions follow utility maximization - However, an enormous number of studies show that we are not utility maximizers and that we are profoundly influenced by factors having little to do with utilities - We regularly make choices that are flatly inconsistent with other choices that we have made - Question in figure 13.7: Clear preference given to Program A - Figure 13.8: Change in how the problem is phrased (the frame of the decision) has a strong impact on the participant’s choices o Pattern reverses, and 78% opt for Program B - Participants can quite likely contradict him/herself - Figure 13.9: Survival frame, only 18% chose radiation over surgery - When participants given the mortality frame, the number more than doubled, 44% favoured radiation - Figure 13.10: First problem, 72% chose the first option o Second problem: People generally chose the second option - If the frame casts a choice in terms of losses, the decision-makers tend to be risk-seeking: they are quite willing to gamble, in hopes to avoiding or reducing the loss - When contemplating gains, decision-makers tend to risk-averse (not risk-seeking) - Problem arises when people flip-flip between these strategies depending on how the problem is framed… this flip-flopping leaves people wide open to manipulation, to inconsistency, and to self-contradiction Framing of Questions and Evidence - Figure 13.11: To which parent will you award sole custody of the child? o Asked this question, people tend to favour Parent B (64%) o Things are different when we ask participants to which parent they would deny custody o Asked this question, 55% chose to deny custody to Parent B Maximizing Utility versus Seeing Reasons - One broad reason to this is that people are trying to use utility calculations when making their decisions, but just aren’t very good at it o Pulled off track by various distractions and complications including how the consequences of a decision are framed - Different possibility: Maximizing utility is not our goal. Our goal is to make decisions that we feel good about, decisions that we think are reasonable and justified (reason-based choice) o Study: Half considered Scenario A in Fig 13.12 – 66% would buy the Sony, only 34% said they would wait until they learned about the other models o Scenario B: A much larger % chose to wait until they’ve learned about the other models o But with utility perspective, you should choose to buy the Aiwa player o This is an understandable result if people are looking for reasons for their decisions: When both the Sony and the Aiwa are available, it’s harder to find persuasive arguments for buying one rather than the other… When no good argument in view for buying one of these models, people buy neither - Redelmeier and Shafir: Gave medical doctors a problem identical to the Aiwa/Sony problem (two different treatments) and the results were identical – when doctors couldn’t justify one drug option over the other, they chose neither The Reasoning in Reason-Based Choice - By reason-based choice, our decision-making is dependent on our capacity to find reasons, and to judge those reasons persuasive - Any factor that influences our thinking in general should have a direct impact on decision-making - Confirmation bias also influences decision-making - Confirmation bias in Fig 13.11: “What would justify giving custody to one person or another?” - We also need dual-process models of decision making o This is correct: Depending on how a decision is cast, people sometimes rely on fast, intuitive strategies in evaluating their options, and sometimes rely on fast, intuitive strategies in evaluating their options, and sometimes rely on more-careful, more-calculating strategies - Decision-making, like judgment, also seems to
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