Questions and Answers
What psychological phenomenon does the sunk-cost effect illustrate in decision-making?
Which of the following factors is crucial for effective debiasing in decision-making?
How does normative rationality differ from behavioral economics?
What is a primary goal of debiasing interventions?
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Which psychological model is often associated with the concept of rational choice?
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What role does self-reflection play in decision-making processes?
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What is a characteristic of intuition as it relates to decision-making?
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In behavioral economics, what is the significance of heuristics?
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What is primarily examined in the study by Hong and Chang regarding decision-making?
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What is the focus of Deci and Ryan's work on goal pursuits?
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Which phenomenon is described by Hsee and Weber in the context of risk preferences?
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What concept do Hastie and Dawes challenge in their work on rational choice?
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What aspect of decision-making does Donovan, Güss, and Naslund focus on in their research?
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What does the power primer discussed by Cohen emphasize?
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What critical argument is presented by Kahneman and his colleagues regarding major decisions?
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What do Detje's theories of human action explain?
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What does the homo oeconomicus model suggest about human beings?
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How do cognitive biases influence human decision-making?
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What percentage of business decisions, according to Nutt (2002), are reported to fail?
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What is a common misconception regarding cognitive biases and human decisions?
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Which of the following best characterizes 'sunk-costs' in decision-making?
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Which statement is true regarding real-life decision-making as discussed in the research?
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What role do debiasing interventions play in decision-making?
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How does the perception of human decision-making shortcomings affect its evaluation?
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Study Notes
Sunk-Cost Effect and Decision-Making
- The sunk-cost effect refers to the tendency of individuals to continue an endeavor, or continue consuming, based on prior investments rather than future costs or benefits.
- Meta-analytic reviews highlight this bias's significant impact on economic decision-making, revealing patterns of irrationality in human behavior.
- Simon's model of rational choice suggests humans act as rational agents aiming to maximize utility, yet empirical research indicates systematic deviations from this model due to cognitive biases.
Cognitive Biases
- Cognitive biases systematically affect real-life decision-making, challenging the assumption of human rationality.
- Past studies indicate that about 50% of business decisions fail, underscoring a perceived flaw in human decision-making capabilities.
- Various taxonomies exist to categorize these biases, informing on how they influence choices.
Debiasing Techniques
- Techniques for debiasing are essential to improve decision-making, suggesting structured approaches to mitigate the impacts of biases.
- Known methods include training and self-reflection which can enhance dynamic decision-making abilities in uncertain environments.
The Role of Intuition and Reasoning
- Research explores the interplay between intuition and analytical reasoning in decision-making, suggesting that different self-construals may influence reliance on feelings versus reasoning.
- Intuition plays a critical role alongside cognitive processes, impacting how choices are framed and evaluated in scenarios involving risk and uncertainty.
Implications for Economic Behavior
- The discussion surrounding the homo oeconomicus model reveals the contrast between theoretical expectations and actual behaviors observed in real-world contexts.
- The investigation into self-reflection and insight emphasizes the importance of understanding motivation behind biased decisions, potentially leading to strategies that enhance decision quality.
Overall Themes
- Investigation of decision-making processes highlights the importance of understanding biases, intuition, and the rationality model.
- Insights gained from examining cognitive behavior can inform practical applications in fields such as economics, psychology, and business management.
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Description
This quiz explores the concepts of the sunk-cost effect in economic decision-making, as discussed in various scholarly articles. It also reviews heuristics and biases in judgment under uncertainty as presented by prominent researchers. Test your knowledge on these key behavioral economics topics.