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10 Cards in this Set

  • Front
  • Back
Homo Economicus
rational actors should always make choices that maximize utility

must have consistent, well-ordered preferences

both seem reasonable at first, but are tremendously demanding

Bounded Rationality
humans are imperfect, but seek to optimize accuracy

Herb Simon also conceptualized satisficing
Fundamental Principle of Judgment
speed-accuracy trade-off

for functional reasons, human judgment is often driven by speed more than accuracy
Behavioral Decision Theory
examines how REAL decisions match with decisions based on "rational" decision making
Kahneman and Tversky

Attribute substitution and Effort reduction

rules of thumb or short-cuts used on complicated judgment and decision tasks

not irrational - they usually make sense, but can lead to misjudgments
Original Big 3 Heuristics
Representativeness Heuristic
Judgment: is instance A a member of category B?

Shortcut: how much does A resemble a prototypical instance of category B?

Conjunctive fallacy: conjunctive events cannot be more likely than either event alone

Perceptions of Randomness
Law of Small Numbers (people want random sequences to be more mixed than they'd usually be)
Hot Hand (under-appreciate randomness)
Gambler's Fallacy (over-appreciate randomness)
Neglecting base rates (lawyer or engineer?)
Nonregressive prediction (regression to the mean)

basic idea: for intentional behaviors, people think streaks will continue; for non-intentional behaviors, people think streaks will end
Availability Heuristic
Judgment: How frequently does event A occur?

Shortcut: Do examples of event A come to mind easily?

Outcome: event A is judged to occur frequently to the extend that instances of event A are easily available in memory
Anchoring and Adjustment
people look for a place to "start" judgment, then "adjust" from this anchor

anchor is "sticky" - people don't adjust sufficiently, so where you start affects the judgment

thought to be a heuristic, but not anymore (no attribute substitution)
Dual-Process view of decision making
Intuition and Effortful Reasoning