Cognitive Biases: Heuristics and Framing Effects

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Questions and Answers

What was the outcome preference for Program A when compared to Program B?

Both programs saved equal numbers of people.

Program A had a lower probability of saving people.

72% chose Program B.

72% chose Program A. (correct)

How do the outcomes of Program C and Program D compare?

Both programs lead to the same expected outcome. (correct)

Program D has a higher probability of saving lives.

Program C has a higher risk of people dying.

Program C is preferred because it guarantees fewer deaths.

What principle does loss aversion illustrate regarding decision-making?

Potential gains are prioritized over potential losses.

Losses weigh less than gains in decision-making.

Losses weigh twice as much as gains in our considerations. (correct)

People are always rational in their choices.

What effect does framing have on people's choices between programs?

Framing in terms of gains encourages a sure bet mentality. Signup and view all the answers

How does expected utility theory contrast with behaviors observed in risk taking?

Behaviors often contradict the principles of expected utility theory. Signup and view all the answers

What happens to subjects' gender frequency estimates when there are more celebrity names of one gender than ordinary names?

Subjects estimate more names for that gender Signup and view all the answers

Which phenomenon describes the frequent misjudgment of rare risks due to media coverage?

Availability heuristic Signup and view all the answers

In the study by Chapman and Chapman, what feature did subjects incorrectly associate with clinical diagnoses?

Peculiar eyes Signup and view all the answers

What is a result of using the availability heuristic when assessing risk?

Greater attention to rare but dramatic events Signup and view all the answers

Why might people use the availability heuristic instead of actual data?

They lack access to comprehensive studies Signup and view all the answers

What can lead to the formation of illusory correlations?

Prior associations influencing perceptions Signup and view all the answers

What does the underlying proportion of male and female names manipulated in the study reflect?

A 50/50 ratio Signup and view all the answers

Which of the following is NOT an example of events often misjudged through the availability heuristic?

Car crash fatalities Signup and view all the answers

What does the MINERVA-DM model primarily focus on in decision making?

Computational models of global similarity Signup and view all the answers

Which heuristic is demonstrated by the MINERVA-DM model?

Availability heuristic Signup and view all the answers

What is a key concept behind estimating the probability of an event according to the MINERVA-DM model?

The number of memories consistent with the event Signup and view all the answers

Which of the following is NOT discussed as a learning outcome related to the MINERVA-DM model?

Recognizing social influences on decisions Signup and view all the answers

What does the MINERVA-DM model suggest about rare events in decision making?

They are overweighted based on retrieval from memory Signup and view all the answers

What aspect of loss aversion does prospect theory primarily describe?

The quantitative nature of loss aversion Signup and view all the answers

What factor contributes to the accuracy of decisions made using the recognition heuristic?

Recognition of the options presented Signup and view all the answers

What is a criticism mentioned regarding heuristic usage?

Misapplication of heuristics can cause problems Signup and view all the answers

In predicting outcomes, how well did amateurs perform compared to experts in Wimbledon 2003?

Amateurs could match or outperform experts by betting on recognizable names Signup and view all the answers

Which group had a higher success rate in recognizing the more populated city between San Antonio and San Diego?

Germans Signup and view all the answers

What is a key finding of prospect theory regarding losses and gains?

Losses are weighted more heavily than gains. Signup and view all the answers

What shape does the psychometric function described by prospect theory take?

S-shaped function. Signup and view all the answers

What limitation does the critique of Kahneman and Tversky's work highlight?

Lack of formal modeling in their theory. Signup and view all the answers

What does the term 'utility' refer to in the context of expected utility theory?

An outcome we desire or benefit from. Signup and view all the answers

Which of the following best explains the non-linear aspect of the psychometric function related to loudness?

A small change in loudness requires a significant increase in sound intensity. Signup and view all the answers

How does prospect theory challenge classical interpretations of utility theory?

It suggests individuals evaluate the psychology of gains and losses differently. Signup and view all the answers

What significant influence did the work of Kahneman and Tversky have on economics?

It prompted the development of the field of behavioral economics. Signup and view all the answers

What psychological concept is illustrated by the weight assigned to a loss of 5 cents being more negative than a gain of the same amount?

Loss aversion. Signup and view all the answers

Study Notes

Availability Heuristic

The availability heuristic, proposed by Tversky and Kahneman, suggests that people estimate the probability of events based on how easily examples come to mind.
This can lead to misleading conclusions as people might overestimate the probabilities of events that receive significant media attention, even if they are relatively rare, such as deaths from vaccinations.
Tversky and Kahneman (1974) cite a study by Chapman and Chapman where subjects incorrectly associated peculiar eyes with particular clinical diagnoses, simply because they recalled previous associations.

Framing Effects

Framing effects demonstrate how the presentation of a choice can impact decisions, even if the underlying outcomes are identical.
When framed in terms of gains, people tend to prefer risk aversion, opting for guaranteed outcomes.
When framed in terms of losses, people tend to be more risk-seeking, choosing options with higher potential gains despite the risk.

Loss Aversion

Loss aversion, a principle outlined by Kahneman and Tversky (1979), posits that individuals value potential losses as more significant than equivalent gains.
People are more likely to choose risky options when they believe they can avoid losses.

Prospect Theory

Prospect theory, developed by Kahneman and Tversky (1979), describes the psychological value of gains and losses, which, in turn, influences our decisions.
It proposes an S-shaped psychometric function where losses are weighted more heavily than gains, and the function exhibits diminishing sensitivity as gains or losses increase.

Criticisms of Kahneman and Tversky's Work

Criticisms include the lack of formal modeling and mechanistic explanations in their work.
While proposing heuristics, they often applied them in a post hoc fashion, sometimes blurring the lines between heuristics like availability and representativeness.
Although prospect theory quantifies loss aversion, it doesn't explain the underlying psychological process.

Recognition Heuristic

Gigerenzer introduced the recognition heuristic, explaining that when faced with unfamiliar options, individuals often choose the one they recognize.
This heuristic can lead to surprisingly accurate decisions, as demonstrated in a city population estimation study.

Formal Theories of Decision Making

The Minerva-DM model, a theory of decision-making based on memory retrieval, suggests that we evaluate outcomes based on their global similarity to existing memories.
It can explain the observed effects of availability and representativeness heuristics, offering a single mechanism for these phenomena.

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Description

Explore the concepts of availability heuristic and framing effects as discussed by Tversky and Kahneman. This quiz challenges your understanding of how cognitive biases influence decisions and perceptions in various contexts. Test your knowledge on how information presentation and memory can affect judgment.