Decison Making and Reasoning

• 2 different types of models for decision making:

  -Prescriptive Models

  -Descriptive Models
• Prescriptive Models - Models describing the best way to make a decision.
• Descriptive Models - Models describing the way best decisions are actually made.
• Cognitive Psychologists are interested in how people actually make decisions.
• Classical Decision Theory:

  → Knew all the options available

  → Understood pros and cons of each option

  → Rationally made their final choice

  → Goal was to maximize value of decision
• Howard’s Dilemma: Thagard & Milgram (1995)

  -“An eminent philosopher of science once encountered a noted decision theorist in a hallway at their university. The decision theorist was pacing up and down, muttering, “What shall I do? What shall I do?”
• Uncertainty: Estimating Probabilities

  Decisions can be based on:

  → Formal Logic

  → Hypothesis testing

  → An educated guess
• Educated Guess - Making a decision based on knowledge from past experiences.
• Problems with Estimating Probabilities - Because of their mood or lack of attention, people may act irrationally, ignore key data, and make bad decisions.
• Subjective Expected Utilities:

  → Consider all possible alternatives

  → Use all information currently known

  → Weigh potential costs and benefits

  → Subjective weighing of various outcomes

  → Sound reasoning consider above factors
• Elimination by Aspects: Tversky (1972) - Begin with a large numbers of options
• Elimination by Aspects: Tversky (1972) - Determine the most important attribute and then select a cutoff value for that attribute
• Elimination by Aspects: Tversky (1972) - All alternatives with values of below that cutoff is eliminated
• Elimination by Aspects: Tversky (1972) - The process continues with the most important remaining attribute(s) until only one alternative remains
• Group Decision Making:

  → Can enhance decision making

  → More ideas

  → Better memory of events
• Disadvantage of Group Decision - Premature decision made by members trying to avoid conflict.
• Heuristics Influencing Decision Making

  ➢ Representativeness

  ➢ Availability

  ➢ Anchoring & adjustment

  ➢ Overconfidence

  ➢ Illusory correlation

  ➢ Hindsight bias
• Representativeness Heuristic

  ➢ Judge probability of an event based on how it matches a stereotype ➢ Can be accurate

  ➢ Can also lead to errors

  ➢ Most will overuse representativeness
• Gambler’s Fallacy - Mistaken belief that a random event is affected by previous random events. Believe that “your turn to win” has come. In reality, probability to win is still same probability
• Base rate Information - The actual probability of an event
• Availability Heuristic - Making judgments about the frequency or likelihood of an event based on how easily instances come to mind. Actual frequency influences how easily evidence comes to mind but so do other factors
• Anchoring-and-Adjustment Heuristic - Begin by guessing a first approximation (an anchor). Make adjustments to that number on the basis of additional information
• Illusory Correlations - An illusory correlation is a perceived relationship that does not, in fact, exist. Illusory Correlations are formed by pairing of two distinctive events.
• Demonstration-Future Events - Predict whether you will experience these events this semester.
• Overconfidence - People tend to have unrealistic optimism about their abilities, judgments, and skills
• Confidence influences how we make decisions, yet our confidence may not be based on a realistic estimate of events or skills.
• Hindsight Bias - The memory of how we acted previously changes when we learn the outcome of an event.
• Reasoning - Studying the human memory system involves questions about how we acquire and retain knowledge.
• Problem Solving and Reasoning research investigates what we do with this knowledge.
• Reasoning - Involves using knowledge within systems of formal logic
• Reasoning can be defined as the mental processes by which people derive conclusions from a given set of premises.
• Two Types of Reasoning:

  -Inductive Reasoning

  -Deductive Reasoning
• Inductive Reasoning – involves deciding what is probably the case based on one’s knowledge.
• In inductive reasoning, when the premises are true, the conclusion is not necessarily true. The conclusion can only be judged true with a certain degree of probability.
• Deductive Reasoning – involves conclusions that follow with certainty from the premises
• Inductive Reasoning - We use inductive reasoning all the time to make decisions about the world
• Inductive Reasoning results in a hypothesis - Testing a hypothesis will result in either confirmation or falsification
• Confirmation – involves finding evidence is support of the hypothesis.
• Falsification – involves finding new evidence that does not support the conclusions.
• Confirmation Bias - People tend to test hypotheses by seeking confirming evidence rather than by attempting falsification of the hypothesis.