Wize University Psychology Textbook > Language & Thought
Judgment & Decision Making
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Judgment & Decision Making
Rational choice theory - we make decisions by determining how likely something is and the value of that outcome
Bounded rationality - humans try to make rational decisions but are limited by our biases, time, cognitive cost, and information available to us, as well as other factors
Heuristics - strategies that simplify the decision making process to make it faster, but don't guarantee we'll reach the solution
Algorithms - slower, well-defined sequences or rules that guarantee a solution
Types of Biases
Availability bias - items that come to mind easier are judged as more frequent
- Example - we judge planes as more dangerous than cars, even though far more people die in car accidents in a given year, because plane crashes are more memorable
Representativeness heuristic - we judge the probability of an event based on how much it represents a prototype, ignoring other relevant information
- Example - we judge a classmate who is sitting in the front row wearing glasses as more likely to be an A student than a C student, ignoring that there are many, many more C students than A students
Anchoring - if asked to make a judgment about a number or proportion, it is affected by the number used to construct the question, even if that number is arbitrary
- Example - One group is asked if the number of vegetarians in the population is less than or more than 10%. The other group is asked about whether it's less or more than 30%. Then they are asked to estimate the percentage of vegetarians in the population. The first group will give lower estimates than the second group.
Framing - framing a question in terms of gains vs. losses shapes the answers given, even if the outcomes are the same.
- Example - Two groups are each asked to choose between two scenarios regarding a sinking ship with 600 passengers
- Group 1
- Rescue A - 200 people survive
- Rescue B - a one-third probability that 600 people survive and a two-thirds probability that nobody will survive
- Group 2
- Rescue C - 400 people will die
- Rescue D - a one-third probability that nobody will die and a two-thirds probability that 600 die
- In Group 1, most people will choose A, and in Group 2, most people will choose D
- If you actually calculate the results of each outcome, A&C are identical, and B&D are identical!
- Prospect Theory
- When a problem is framed in terms of gains we are risk-averse
- When a problem is framed in terms of losses we are risk-seeking
Optimism Bias - belief that, compared to others, we are more likely to experience positive events and less likely to experience negative events
System 1 & System 2 Decision Making
System 1 Decision Making - quick, intuitive, automatic, effortless, emotional
System 2 Decision Making - slow, conscious, effortful, logical
Most of the time, system 1 decision making is perfectly fine. System 2 thinking would require too much energy
We should use system 2 thinking when decisions are important or highly consequential
Practice: Judgment & Decision Making
A specific formula for solving a problem is called _______