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JudgementWe change our opinion of the likelihood of something in light of
new information.
Example: Do you think you did well on the exam?
Yeah, it was ok not to hard.
Friend says that he found it very hard.
You now believe that the exam might have been difficult.
Neglecting base rates Base rate information:
The frequency with which an event occurs.
People often fail to take base rates fully into account.
People do not use base rates in everyday judgements.
Base rates are not used when they are ambiguous, unreliable, or unstable.
Why do we neglect base rates?Representative heuristics
Events that are representative or typical of a class are assigned a high probability of occurrence.
This heuristic is used when people judge the probability that an object or event A belongs to a class or process B.
Example: You are given a description of an individual and are required to
estimate the probability that he/she has a certain occupation.
Estimate will be influenced by the similarity between the individual’s description and your stereotype of that occupation.
Kahneman and Tversky (1973) Jack is a 45 year old man. He is married and has four children.
He is generally conservative, careful, and ambitious. He shows no interest in political and social issues and spends most of his free time on his many hobbies which include sailing and mathematical puzzles.
Is this man an engineer or a lawyer?
Kahneman and Tversky (1973) Half the participants were told that the description was selected
at random from a pool of 100 descriptions and that: A) 70 were engineers B) 30 were lawyers
Or
A) 70 were lawyers B) 30 were engineers
Kahneman and Tversky (1973)Results:
.90 probability that Jack was an engineer
This was the same for the two groups
Regardless of the information given to them about the number of lawyers or engineers
Thus they did not take into account the base rate information
People focus on the description and on the match between the description and the occupation
Conjunction Fallacy Mistaken belief that the combination of two events (A & B) is
more likely than one of the two events alone.
More likely if the events are typical than atypical
Linda is a 31 years old, single, outspoken and very bright. She majored in philosopy. As a student, she was deeply concerned with issues of discrimination and social justice and also participated in anti-nuclear demonstrations.
Rank in order which occupation you believe Linda belongs to.
Conjunction Fallacy Three of the categories were:
Bank teller Feminist Bank teller and Feminist
Most people ranked bank teller and feminist more than bank teller or feminist alone.
Availability Heuristic Estimating the frequency of events on the basis of how easy or
difficult it is to retrieve relevant information from long-term memory.
If a word of three letters or more sampled at random from English text, is it more likely that the word starts with r or has r as its three letters?
Most participants argued that a word starting with r was more likely. words starting with r can be retrieved more easily from memory.
Numerosity Heuristic Over-inferring quantity
People generally eat less when food is divided into small pieces becuase it seems like there is more food.
We use this heuristic when the judging task is difficult.
Support Theory An event will appear more or less likely depending on how it is
described.
A more explicit description of an event will typically be regarded as having greater subjective probability than the same event described in less explicit terms.
Two reasons:
An explicit description draws attention to aspects of the event that are less obvious in the non-explicit description.
Memory limitations mean that people do not remember all of the relevant information if it is not supplied.
Support Theory Evidence (Johnson et al., 1993):
Participants were offered health insurance covering either: (a) hospitalisation for any reason or (b) for any disease or accident.
Those offers were the same, but participants payed more for when health insurance was offered for disease or accident (more explicit).
Recognition Heuristics If one of the two objects is recognised and the other is not
people choose the recognised object as having a higher value.
Which city has a bigger population Geelong or Lefkoşa?
Three components:
1. Search rule: search for name recognition & big landmarks to validate
2. Stop rule: Stop after finding a discriminatory cue
3. Decision rule: Choose outcome
Evaluation Outcome choosen could be due to the recognition heurstic but
could also be due to the person’s knowledge that the recognised city is larger. E.g., Is Melbourne a bigger city or Magusa?
Person needs to also consider whether the recognised city known to be small is larger than the unrecognised city. E.g., Is Girne a bigger city or Darwin?
Evaluation It is not clear why people often overlook information that is well
known to them.
How people decide which strategy to use has not been evaluated.
Decision Making Determined by rational factors on inferences and outcome
information as well as experienced and anticipated emotion.
The two key emotions are regret and fear.
People also make decisions based on social and cultural expectations.
Omission Bias Individual prefers inaction to action
To avoid loss due to their action
Disease kills 5 per 10, 1000
Vaccine has potential side effects
Most parents thus avoid vaccination to prevent side effects
Satisficing Used to make complex decisions
Involves choosing the first option meeting the individual’s minimum requirement.
Satisficers are happier and more optimistic than maximisers, they have greater life satisfaction and experience less regret and self blame.
Prospect Theory Person weighs the subjective values and losses and gains to
make a decision
Loss aversion:
People are much more sensitive to losses than gains
For example: Resort paid 100 dolars – became sick on the way
Most people would continue rather than turn back and go home
Because they would lose 100 dolars rather than gain comfort at home
Prospect Theory Risk Aversion:
Sure gain is chosen Would you like a sure gain of 800 dolars or 85% of gaining 1000
dolars 800 dolars chosen Avoid risky decisions
Risk Seeking: Sure loss of 800 dolars or 85% of losing 1000 dolars They chose option 2: risk losing 1000 dolars
Prospect Theory Self esteem affects whether we decide on risk aversions or risk
seeking.
Those with low self esteem are risk aversions as they would not want to damage their images further by incuring a potential risk.
