Heuristics and Biases in Decision Making Quiz

Conjunction Rule

• The probability of a conjunction (p(heart attack & over 55)) cannot be more probable than one of its conjuncts (p(heart attack)).
• P(Heart attack) ≥ P(Heart attack & over 55)

Coherence Judgments

• Coherence judgments should be internally consistent with appropriate principles.
• Examples of principles include axioms of probability theory and axioms of expected utility theory.
• It is irrational to endorse principles that contradict one another.

Correspondence

• Correspondence refers to how well people's judgments correspond with the actual state of the world.
• Judgments are derived from facts or cues in the environment.
• The validity of cues is determined by how they relate to outcomes of interest.

Heuristics or Biases?

• Heuristics and biases are informal models of decision-making.
• Introspection and reflection can be used to evaluate what makes decisions good or bad, or easy or hard.
• Two benchmarks for evaluating decision-making are coherence and correspondence.

Bayes' Theorem

• Bayes' Theorem is a method for working out what you don't know from what you do know.
• It updates your belief in a hypothesis (H) on the basis of data (D) that you have.
• p(H/D) = p(D/H) * p(H) / (p(D/H) * p(H) + p(D/not H) * p(not H))

Bayes' Theorem Example

• Imagine two bags filled with millions of poker chips, one with 70% red and 30% blue, and the other with 70% blue and 30% red.
• Suppose a dozen chips are drawn from a randomly chosen bag, with 8 red chips and 4 blue chips.
• The correct answer is that the probability of the chips being drawn from the bag with mostly red chips is 97%.

Conservatism

• Conservatism refers to the tendency to not extract as much information from the sample as required by Bayes' Theorem.
• Edwards (1968) found that most people underestimated the probability.

Attribute Substitution

• Attribute substitution occurs when people answer a hard question with an easier answer.
• The target attribute is substituted by a more accessible one.
• What determines accessibility is representativeness (the degree to which one thing resembles another) and availability (the ease with which examples come to mind).

The Linda Problem

• The Linda problem is an example of attribute substitution.
• Linda is 31 years old, single, outspoken, and very bright, and was deeply concerned with issues of discrimination and social justice.
• Seven statements are given, and participants are asked to rank them in order of probability or similarity.

Heuristics as Explanations

• One-word descriptions provide no information about the process.
• The heuristics explanations are circular and can be read into as desired.
• Gigerenzer (1996) criticized the work of Kahneman and Tversky.

Transitivity of Choice

• Transitivity of choice is a coherence criterion.
• If a rational decision maker prefers Alternative B to Alternative A, and Alternative C to Alternative B, then they should prefer Alternative C to Alternative A.
• The money pump scenario is a hypothetical example of intransitivity, where a person is willing to pay something to trade a less preferred alternative, but ends up back where they started and out of pocket.

Ecological Rationality

• Ecological rationality measures rationality in terms of success in the world, such as making competitive decisions and accurate predictions.
• It does not equate rationality with following a coherence rule, but by the "match" between a cognitive strategy and the structure of the environment.
• The ecological-rationality research strategy involves identifying the goal of an individual or group, identifying the set of strategies available to reach that goal, identifying the structural properties of the environment, and determining the ecological rationality of the strategies in the environment.