Week 11: Judgement + Decision Making

• Judgement

  Initial part of decision-making process where PP estimates the likelihood of various events with incomplete information
• Decision-making

  Making a selection from various options
• Base-rate fallacy

  Ignoring the frequency of an event within a given population
• Describe the taxi-cab problem

  85 % cabs are green and 15 % cabs are blue. EWT identified the accident cab as blue. But they are wrong 20 % of the time. What probability is that the cab is blue?
• How is the taxi-cab problem solved using the Bayes theorem?


  By multiplying the probabilities of prior odds with new information.
• What is the correct answer for the taxi-cab problem?

  41 %
• Describe the lawyer engineer problem.

  The lawyer-engineer problem gives some background to the character and then says that out of 100 descriptions, 30% are engineers, and 70% are lawyers. Then, PP guesses the probability that the character Jack is an engineer.
• What type of heuristic is shown in the lawyer-engineer problem and taxi-cab problem?

  Representativeness heuristic
• Representativeness heuristic

  Likelihood of an outcome based on stereotypes
• Availability heuristic

  Estimating probability of an event based on subjectivity
• Affect heuristic

  Using emotional responses to influence judgments and decisions
• Pachur et al. Task

  PP asked to judge which of two causes of death have a high mortality rate and had to recall instances from direct experiences and media sources and their feelings towards death (affect heuristic)
• Pachur et al. Findings

  People make better judgments using direct experiences rather than direct experiences and media sources.
• Krynski and Tenenbaum (2007) conducted a study on what?

  PP asked what chances a 60-year-old woman has breast cancer.
• What are Krynski and Tenenbaum's (2007) findings?

  PP ignore base rates by saying she has 70-90 % chance when actually it is 25 %. But with modified alternative explanation, PP made more accurate guesses.
• Krynski and Tenenbaum (2007) findings suggest we can make more accurate judgements by considering alternative explanations for an event.
• Aside from the lawyer-engineer problem, what other problem shows representative heuristic and conjunction fallacy?

  Feminist bank teller problem
• What is the conjunction fallacy?

  Misjudging the likelihood of two events occurring together as more probable than just one of the events occurring.
• Describe two pieces of evidence showing that PP handle raw frequencies better than probabilities.

  • Higher % answered correctly for mammogram problem
  • Medical students gave better diagnostic hypotheses with natural frequencies than probabilities.
• What are the different theories of judgement?

  Fast-and-frugal heuristics and dual-process theory
• Dual-process theory


  Judgement theory that acknowledges logical thinking and is split into 2 systems
• What is system 1 in dual-process theory?

  Fast, implicit, and emotionally charged and uses representative heuristics.
• What is system 2 in dual-process theory?

  Slower, consciously monitored and rule-governed.

  Uses base-rate information and corrects system 1 errors.
• Prospect Theory


  Making decisions based on expected gains and losses.
• According to prospect theory, what is loss aversion?

  More sensitive to potential losses than potential gains
• According to prospect theory, what is risk aversion?

  Preference for sure gains over uncertain gains.
• What are framing effects?

  Decisions being influenced by situational effects like wording of problems which are irrelevant to decision making
• In the gain-frame condition, certain gain was preferred by PP but in the loss-frame condition, unsure loss was preferred
• What type of aversion is related to the sunk-cost effect?

  Loss aversion
• One study showing the sunk-cost effect found that PP chose to allow a couple to continue their refundable deposit holiday even though they were ill.
• Sunk-cost effect


  Investing additional resources to justify a previous commitment that has proven successful so far.
• Define Satisficer


  PP content with making good decisions, are more optimistic and experience less regret and self-blame than maximisers.
• Define maximiser.


  PP more likely to work for desirable goal and wait longer for this.
• What is the fast-and-frugal heuristic?

  Take the best strategy/recognition heuristic