decision making

Question 1

what perspective models do economics rely on for decision making

Answer 1

• expected value: normative, ideal performance under ideal circumstances, ppl weight options then choose one with highest expected value, deals with money
• expected utility: ppl choose alternative with highest utility/benefit

Question 2

a ____ model tells us how we ‘ought’ to make decision and a ___ model shows what people actually do

a) descriptive, perspective
b) descriptive, performance
c) perspective, descriptive
d) detailed, performance-based

Answer 2

c) perspective, descriptive

Question 3

loss aversion

Answer 3

• place high value on what is yours, don’t like to lose
• if you lose more than you gain don’t take the deal
• avoiding loss permeates judgement

Question 4

loss aversion tends to maintain the _____ ____

Answer 4

• status quo

Question 5

anchoring

Answer 5

• when making estimates, people start with initial estimate then adjust it
• the position you start from influences adjustment

Question 6

framing effects

Answer 6

• the way a problem is framed changes how options are evaluated

Question 7

risk aversion

Answer 7

• depending on how info is presented, different options seem less risky

Question 8

availability heuristic

Answer 8

• judgements based on which relevant instances can be retrieved from memory
• likelihood of event is evaluated on how easy it is to come up w examples

Question 9

heuristics

Answer 9

• strategies that can be applied easily to wide variety of situations that often lead to reasonable decisions

Question 10

representative heuristic

Answer 10

• if something appears to fit a category, you will judge them to be a part of the category

Question 11

implicit bias

Answer 11

• discriminatory biases based on implicit attitudes/stereotypes
• automatic, outside of person’s awareness
• resistant to extinction
• formed through experiences

Question 12

what impacts how a person makes a decision

Answer 12

• implicit bias (stereotypes)
• heuristic (representative and availability)
• framing effects
• risk aversion
• loss aversion
• anchoring

Question 13

_______ racism/sexism is when bias is unstated and hidden

Answer 13

Benevolent

Question 14

how are biases/stereotypes formed

Answer 14

• social learning process (parents/significant other/media)
• categorization processes (cognitive efficiency, understanding/prediction, enhance social identity)

Question 15

gambler fallacy

Answer 15

• belief that certain random events are less or more likely to occur based on outcome of previous events (ie flipping a coin)

Question 16

biases vs heuristics

Answer 16

• biases: systemic errors arising from use of heuristic in decision making
• heuristics: simple cognitive rules, easy to apply, yield acceptable decisions, can lead to errors

Question 17

hindsight bias

Answer 17

• once facts of a case are learned, we tend to believe we knew it all along

Question 18

overconfidence bias

Answer 18

• confidence in decisions rises as more info is collected
• most extreme in tasks of higher difficulty

Question 19

_______ bias is when more vidi events are remembered better, and we base judgement on how often they occur

Answer 19

saliency bias

Question 20

familiarity bias

Answer 20

• judge event as more frequent/important bc it is more familiar in memory

Question 21

illusory correlations

Answer 21

• in any random sequence, patters appear to be meaningful
• occur bc brain is constructed to search out meaningful patterns/make sense of experiences

Question 22

regression to the mean

Answer 22

• as sample size increases, sample is more likely to represent the population

Question 23

two types of reasoning

Answer 23

• inductive: make prediction, generate knowledge, facts>generalized
• deductive: how ppl have a tendency to think about certain things, general>specific, more reasoning used

Question 24

Syllogisms

Answer 24

• basic reasoning puzzle/prob you have to solve
• given often 2 premises, judge if conclusion is true based on them
• ex all thai food is yum, spring rolls are yum, therefore spring rolls are thai food

Question 25

Belief bias (syllogism)

Answer 25

- tendency to think that a syllogism is valid if conclusions are believable

Question 26

Difference between true and valid (syllogism)

Answer 26

- true: the way the world as we know it works - valid: logically follows from premises

Question 27

why do ppl get confused on true/valid syllogisms?

Answer 27

- we judge conclusion on what we know abt the real world - we are biased to see what we believe to be true to be logically valid as well

Question 28

what makes the distinction between true and valid syllogisms hard?

Answer 28

- quantifiers: how does it apply? - Negation: contradiction

Question 29

propositional reasoning

Answer 29

- assertion/proposition that is tested - have a statement, answer if its true or not

Question 30

two ways of expressing propositional reasoning (hint: think latin)

Answer 30

- Modus Ponens: mode that affirms. ex if p, then q. p. therefore, q - modus tollens: way in which this is denied. ex. if p, then q. q is false. therefore, P is false.

Question 31

which modus is used to test a rule by finding where the rule is broken?

Answer 31

modus tollens

Question 32

why is modus tollens more difficult to understand than modus ponens

Answer 32

- falsification principal - coming up w tests that negate rule is harder

Question 33

confirmation bias

Answer 33

- tendency to only look for info that confirms belief and ignore what disproves it

Question 34

how to fight against confirmation bias

Answer 34

- falsification principal: look for situations that falsify the hypothesis/what you are testing

Question 35

what affects reasoning

Answer 35

- general world knowledge - experience