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What is meant by 'base rate neglect' in decision making?

Considering only recent data when making decisions.

Focusing solely on personal experiences rather than statistical data.

Relying on complex calculations to every decision.

Ignoring the overall likelihood or frequency of an event. (correct)

In the given example regarding births in hospitals, why is Hospital A's sample problematic?

People were biased towards the assumption of a 50% chance of being born male. (correct)

The sample size is too large to draw conclusions.

The majority of births in Hospital A were male, which skews the data interpretation.

Hospital A had a statistically significant result despite a small sample size.

What role do heuristics play in decision making according to the content?

Heuristics are fast and often effective solutions but can lead to biases. (correct)

Heuristics are only useful in mathematical and statistical contexts.

They eliminate the influence of emotions in decision making.

They provide slow and complex solutions to enhance decision accuracy.

Which of the following is an example of a nudge?

Placing healthy foods in prominent areas within a store. Signup and view all the answers

How can biases in decision making be understood according to the provided content?

With models like prospect theory or by examining heuristics. Signup and view all the answers

What defines a decision-making situation?

Alternatives that are mutually exclusive, with future consequences. Signup and view all the answers

In normative approaches, what does expected value (EV) compute?

The average outcome of a decision given various probabilities. Signup and view all the answers

What phenomenon describes people being risk averse in the domain of gains?

They prefer lower but guaranteed rewards over higher-risk options. Signup and view all the answers

What is a common characteristic of the representativeness heuristic?

It results in individuals basing decisions on stereotypes or similarities to known categories. Signup and view all the answers

Which type of decision-making is characterized by biases arising from simplified thinking?

Prescriptive approaches. Signup and view all the answers

What does the availability heuristic rely on?

The probability of an event based on how easily examples come to mind. Signup and view all the answers

What type of choice reflects risk-seeking behavior in decision-making?

Opting for a gamble that offers a higher reward despite a lower probability. Signup and view all the answers

What is commonly misunderstood about decision-making in the presence of heuristics?

Heuristics may lead to systematic errors in judgment. Signup and view all the answers

What is the concept of misjudging a sequence as more 'random' called?

The gambler's fallacy Signup and view all the answers

Which statement illustrates base rate neglect?

Thinking Tom is more likely to be a graduate student in Computer Science based on his description rather than actual data. Signup and view all the answers

Based on the conjunction fallacy, how did subjects rank Linda's likelihood of being a bank teller and an active feminist compared to being just a bank teller?

More likely as bank teller and feminist Signup and view all the answers

What common misconception is evident when people believe the outcomes of events are 'due'?

Gambler’s fallacy Signup and view all the answers

In the example about Tom, what percentage of subjects believed he was more likely to be in Computer Science?

95% Signup and view all the answers

Which of the following best describes the conjunction fallacy?

Assuming that specific information increases likelihood over general information. Signup and view all the answers

Which of these describes an example of the representativeness heuristic?

Judging Tom's likelihood of studying humanities solely on his personality description. Signup and view all the answers

Why do people fall for base rate neglect in decision-making?

They tend to focus on specific instances instead of overall data. Signup and view all the answers

What is the likelihood of rolling five 1s in a row compared to rolling six mixed numbers?

More likely than rolling six mixed numbers Signup and view all the answers

What principle explains why some people believe certain outcomes seem more random than others?

The Representativeness Heuristic Signup and view all the answers

In the context of the Gambler's Fallacy, what is the misconception people have when betting on a fair die after a long series of the same result?

The belief that future rolls are influenced by past rolls Signup and view all the answers

Which of the following describes a common bias when judging probabilities?

Base Rate Neglect Signup and view all the answers

Why might a gambler believe a 6 will come up again after rolling eight 6s consecutively?

They are relying on the trend suggested by previous outcomes Signup and view all the answers

When flipping a coin six times, which sequence is considered to appear less random?

H H H T T T Signup and view all the answers

Which of the following correctly represents the assumption made by people about the regularity of independent events?

Each event must balance out previous events Signup and view all the answers

Which of the following statements about independent events is true?

The outcome of each event is independent of others Signup and view all the answers

Study Notes

Judgment & Decision-Making

Decision-making involves choosing among alternatives with mutually exclusive options, considering future consequences and different values
Decision-making is prevalent in daily life
Normative approaches to decision-making involve calculating expected value (EV)
EV is the average cost of winning plus the average cost of losing in a scenario with various possible outcomes and probabilities
Descriptive approaches acknowledge risk aversion in gains and risk-seeking in losses
People tend to prefer guaranteed gains over risky gains and avoid guaranteed losses over risky losses
Prescriptive approaches explore heuristics and biases
Biases in judgments reveal heuristics underlying decisions in uncertain situations
Several heuristics and biases impact decision-making
Representativeness heuristic: judgments of probability heavily influenced by how similar an event seems to prior beliefs or prototypes
Availability heuristic: estimates of frequency or probability are influenced by ease of recall
Anchoring and adjustment heuristic: initial values (anchors) heavily influence subsequent judgments; adjustments are often insufficiently substantial
The Gambler's Fallacy: The misconception that outcomes of random events are influenced by previous outcomes
The Conjunction Fallacy: The tendency to mistakenly believe that two events are more likely than one event when one event is part of the other
Base Rate Neglect: Neglecting the base probability of an event when making judgments based on related information
Ignoring the sample size: making judgments about probabilities, based on insufficient sample size.
Decision Architecture: Design of environments to encourage or discourage specific choices
Nudges: subtle changes to decision environments aimed at increasing adoption of specific choices
Game Theory: Studies how rational individuals make decisions when interdependent outcomes are anticipated
Intertemporal Choice: Decisions involving choices between outcomes occurring at different points in time
Emotions: factors influencing decision-making processes
Availability Heuristic: estimates of frequency or probability are influenced by ease of recall
Examples of the Availability heuristic include determining the frequency of words or the number of men or women on a list.
Anchoring and adjustment heuristic: initial values (anchors) heavily influence subsequent judgments; adjustments are often insufficiently substantial
Example of anchoring and adjustment: participants estimating probability of UN member country being African after being shown a random number. Random number impacts probability estimates

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Questions and Answers

What is meant by 'base rate neglect' in decision making?

In the given example regarding births in hospitals, why is Hospital A's sample problematic?

What role do heuristics play in decision making according to the content?

Which of the following is an example of a nudge?

How can biases in decision making be understood according to the provided content?

What defines a decision-making situation?

In normative approaches, what does expected value (EV) compute?

What phenomenon describes people being risk averse in the domain of gains?

What is a common characteristic of the representativeness heuristic?

Which type of decision-making is characterized by biases arising from simplified thinking?

What does the availability heuristic rely on?

What type of choice reflects risk-seeking behavior in decision-making?

What is commonly misunderstood about decision-making in the presence of heuristics?

What is the concept of misjudging a sequence as more 'random' called?

Which statement illustrates base rate neglect?

Based on the conjunction fallacy, how did subjects rank Linda's likelihood of being a bank teller and an active feminist compared to being just a bank teller?

What common misconception is evident when people believe the outcomes of events are 'due'?

In the example about Tom, what percentage of subjects believed he was more likely to be in Computer Science?

Which of the following best describes the conjunction fallacy?

Which of these describes an example of the representativeness heuristic?

Why do people fall for base rate neglect in decision-making?

What is the likelihood of rolling five 1s in a row compared to rolling six mixed numbers?

What principle explains why some people believe certain outcomes seem more random than others?

In the context of the Gambler's Fallacy, what is the misconception people have when betting on a fair die after a long series of the same result?

Which of the following describes a common bias when judging probabilities?

Why might a gambler believe a 6 will come up again after rolling eight 6s consecutively?

When flipping a coin six times, which sequence is considered to appear less random?

Which of the following correctly represents the assumption made by people about the regularity of independent events?

Which of the following statements about independent events is true?

Study Notes

Judgment & Decision-Making

Studying That Suits You

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