213 Decision Making, Problem Solving, Intelligence

• Heuristics


  Mental short-cuts that allow us to skip careful deliberation to draw an inference
• Slow thinking


  Serial logical analysis of information, effortful and non-automatic
• Fast thinking


  Heuristics-based reasoning, easy and automatic
• Availability heuristic


  A heuristic in which we estimate the probability of an event based on the ease at which it can be brought to mind
• Availability heuristic


  • What is more common? Words that start with "R" or words in which the third letter is "R"?
  • What is more likely to cause death? Tornados vs. Asthma
• Affect heuristic


  The tendency to overestimate the risk of an event that generates strong emotional response
• Representativeness heuristic


  People tend to make inferences on the basis that small samples resemble the larger population they were drawn from
• Base rate neglect

  When you fail to use information about the prior probability of an event to judge the likelihood of an event
• Conjunction fallacy


  False belief that the conjunction of two conditions is more likely than either single condition
• Anchoring


  The tendency for people to overweight initial information when making decisions
• Regression to the mean


  When a process is somewhat random, extreme values will be closer to the mean when measured a second time
• Bounded rationality


  The theory that humans are rational relative to environmental constraints (e.g. Time pressure) and individual constraints (e.g. Working memory, attention)
• Satisficing


  People look for solutions that are "good enough"
• Ecological rationality


  The view that heuristics are the optimal approach to solving a particular problem given the constraints
• Perceptual decision making


  Decisions based on an objective (externally defined) criterion
• Value-based decision making


  Decisions based on a subjective (internally defined) criterion
• Decisions under risk


  Decisions when outcomes are uncertain
• Ambiguity


  When you have incomplete information about the consequences
• Risk averse


  Decision maker has positive risk premium and needs a chance at winning a lot more than a certain option to select the risky option
• Risk neutral


  Decision maker has zero risk premium and sees no difference between the options
• Risk seeking


  Decision maker has negative risk premium and does not need a chance at winning more than the certain option to gamble
• Framing effect


  The display of inconsistent risk preferences depending on the framing (loss vs gains) of the problem
• Endowment effect


  The tendency to ascribe higher valued objects people own or possess compared to identical objects they do not own
• Prospect theory


  A psychological theory that explains how people make decisions under uncertainty
• Utility


  Subjective value assigned to an object (i.e. satisfaction)
• Loss aversion


  The utility function is steeper for losses than gains, so losses loom larger than gains
• Probability weighting

  People do not treat probabilities in an objective manner, overestimating unlikely events and underestimating likely events
• System 1


  Fast, effortless, automatic, intuitive, emotional thinking
• System 2


  Slow, deliberative, effortful, explicit, logical thinking
• Prediction error


  The difference between what you predicted would happen and what happened
• Event boundaries


  Physical boundaries (doorways) and scenarios (before/after an exam) that define separate events in episodic memory
• We forget items immediately after crossing an event boundary
• Framing of information as well as emotions can guide how we assess risk when we make choices
• People avoid gambles (choices; risk averse) when they are equally likely to either gain or lose
• Why we forget what we were thinking about upon entering a different room (doorway effect)
• Why you may forget information before an exam (a scenario boundary)
• Decision-making


  When we make decisions or judgments, we use heuristics guided by the principles of what we expect
• Framing effect


  Psychological theory that framing of information as well as emotions can guide how we assess risk when we make choices
• Prospect Theory


  Psychological theory that decision-making and risk evaluation is affected by affect
• People avoid gambles (choices; risk averse) when they are equally likely to either lose a smaller amount $10 or win a larger amount $15