Lecture 1

Question 1

What is a judgement?

Answer 1

• Assessment/belief about the world
• Based on available data
• Integrating multiple sources of data
• Often imperfect/probabilistic
• e.g do you think it will rain tomo in Cardiff - not a decision
• Decisions are choices between alternatives, and involves judgement about the world

Question 2

What is decision making?

Answer 2

• Commitment to a choice of action
• Deciding what to do
• Mediating conflicting goals e.g might spend money on a night out vs eating out
• Consequences uncertain
• Rational framework: what should I do if I want to achieve this

Question 3

What are the three perspectives?

Answer 3

• Normative analysis: what should we do for the most benefits - optimality (if you want x, you should do this behaviour but not ‘that you should want to do’)
• Descriptives Studies: what do they do to make the decision (compared to normative)
• Prescriptive intervention: elements of morality & ethics
• e.g if you rob a bank, normative says yes, the others say no

Question 4

What is a judgement exactly?

Answer 4

• Attribute in the world, and you have info that retains to the attribute
• There is also random error
• Systematic error (bias): e.g. you overestimate the amount of rain in Cardiff
• Sources of bias are motivational, cognitive and emotional (not necessarily negative, can be useful)

Question 5

What are the two perspectives for defects in decisions and judgements?

Answer 5

• Coherence: internal coherence between things: things aren’t contradictory e.g 70% rain, and 20% doesn’t rain = internal incoherent judgement = allows other people who have better understanding to exploit you (you understand how things work)
• Correspondence: Accuracy with respect to the world: judgement and true probability in reality (can be irrational)

Question 6

What is the money pump problem?

Answer 6

• Lack of coherence to create a money pump problem
• If someone prefers splott to cathays, and then penarth to splott, you cannot say you prefer cathays to penarth as it is incoherent
• Called the intransitivity of preferences - violation of Rational Theory of Choice

Question 7

What defines a good/bad decision?

Answer 7

• Outcome
• Probability
• Context/value/utility
• Assessing utility through expected utility

Question 8

What is expected utility?

Answer 8

• Probability: uncertain
• Taking utility and combining it with how uncertain that utility is
• Need expected value

Question 9

What expected value?

Answer 9

• Taking each alternatives (outcomes) and weighting it by probability
• e.g Rolling a 1 and 1 of two dice, if fair = 1/36, losing = 35/36 (coherent but correspondence depends on if dice are fair)
• So EV = 1/36 x 10 + 35/36 x -10= £-9.4444
• Just because outcome is good, does not mean decision making is good (losing 9 pounds every time you play)
• If the game means winning gets you £10 vs losing nothing, how much should you pay for a ticket?
• 1/36 x10 + 35/36 x 0=0.2778p, so a ticket less than 27p would be worthwhile as it maximises expected value

Question 10

What is the St Petersburg Paradox?

Answer 10

• Flip a fair coin and it tails = win £2, tails on second flip = win £4, third = win £8
• How much would you pay to play
• EV is infinite because of the maths equalling to 1
• Maximise the expected utility over expected value

Question 11

How to objectify utility?

Answer 11

• Graph with objective outcomes e.g £1000 pounds
• What does an increment of £10 do to utility from 0? A larger increase of £1000 to £1010 has lesser increment of utility

Question 12

What is the practical second resolution to the paradox?

Answer 12

Infinite payout is unrealistic, with finite payout, EV changes

Question 13

What is bounded rationality?

Answer 13

• Imperfect knowledge of the world
• Limited cognitive/computational faculties e.g memory/attention
• Preferences are not stable/internally consistent
• Context sensitivity

Question 14

What is satisficing?

Answer 14

• Make adequate rather than optimal decision
• Often near optimal esp when info search cost is considered
• Heuristics as acceptable shortcuts

Question 15

Why does framing affect decisions?

Answer 15

• e.g Across groups of doctors, patients and students, radiation therapy is preferred to surgery 42% when negative mortality frame is used (framed using x% dead vs x% alive) but only 25% when positive survival frame is used
• Largest framing effects are when things are relative rather than absolute risk
• e.g found 79% of hypothetical patients preferred a treatment presented with relative risk benefits compared to 21% who chose the absolute risk option = more persuasive

Question 16

How does presentation of science matter?

Answer 16

Jurors and students were shown stats in frequency form and in probability form through DNA testing, and both students and jurors were more likely to give guilty verdicts if shown probability verdicts

Question 17

How do people view their past decisions?

Answer 17

• Undergrads were asked to list decisions: good and bad and rank them relative to importance and quality
• Good decisions rated higher on quality, and further from neutral = good decisions are better than bad decisions are bad
• Ppts rated bad decisions as significantly less important than their good decisions
• Took ppts less time to come up with bad decisions = most people think their past decisions were fine
• If people are happy with past decision consequences = less likely to ask for help with current decisions