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20 Cards in this Set

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Homo Economicus
rational actors should always make choices that maximize utility

must have well-ordered preferences

both seem reasonable at first, but are tremendously demanding
Classic View of Judgment and Decisions
People's judgments and decisions reflect their underlying beliefs and preferences

Choices REVEAL preferences
Axioms of Rational Decision Making
ordering of alternatives (a>b, a<b, or a=b)

dominances (never choose a dominated strategy)

independence of irrelevant alternatives

description invariance
Constructed Preferences
humans have unstable, inconsistent, incompletely evoked, and imprecise goals "at least in part because human abilities limit preference orderliness"

limitations to memory
limited computation
limited time
Reason-based decision making
people do not always scale, weight, and combine attributes so as to maximize utility (the classic approach)

sometimes they make a decision based on what reasons are most readily available
Reason-based choice
reasons for and against the selection of options
influence of irrelevant alternatives
high vs. low conflict: seeking other options
high vs. low conflict: deferring choice
high vs. low conflict: seeking additional alternatives
specific choice vs. disjunctive choice
Reasons for and against selection of options
according to invariance axiom, equivalent tasks should produce equivalent choices

when we choose options, may focus on reasons for an option (pro reasons)

when we reject options, may focus on reasons against an option (con reasons)
Choice under conflict: dominated/irrelevant options
in theory, dominated options should not influence choices, but they really provide the illusion of a reason

other options compare favorably
Seeking other options
In some contexts, need to decide whether to choose from available options, or continue looking

according to classic model, should only engage in search if the expected value of searching exceeds that of going with the best available alternative
Choice under conflict: deferring choice
sometimes when faced with a difficult decision, a person will choose nonaction

dangerous in times of bad medical situations
Choice under conflict: adding options
sure thing principle: not rational for people to incur a cost to get extra info that is not going to affect their decision

however, people may not have compelling reasons when faced with an uncertain outcome, but do when a definite outcome is brought about

choice between vacation package, no vacation package, and paying to wait to make the decision
Illusory reasons are compelling at first
asking to cut in line at xerox machine because you have to make copies works when it's just a few pages
Reasons can degrade experience
preferences are often affective or aesthetic - not based on a rational pros and cons list

enjoyment of wines degraded when you have to write about it
Framing effects
options can be described in different but "equivalent" ways

frames can influence decision
3 Basic Types of Framing Effects
Risky Choice Framing

Attribute Framing

Goal Framing
Risky Choice Framing
frame set of options with different levels of risk

risk preference is affected

measured by comparison of choices for risky options

200/600 will die --> 400/600 will be saved
Attribute Framing
frame object/event attributes

affect item evaluation

measured by comparison of attractiveness ratings for a single item

75% fat --> 25% lean
10% mortality rate --> 90% survival rate
Goal Framing
frame consequences or implied goals of behavior

affect impact of persuasion

measured by comparison of rate of adoption of behavior

mammogram to catch lump in time --> mammogram to avoid cancer
Reference Point Hypothesis
hypothesized that the frame chosen by speakers tends to be one that increases relative to a reference point

if a cut of meat is more fatty that what is typically sold, then you are more likely to frame it as fatty

half full/half empty based on how full it was before
When are framing effects irrational
when they are random

but they are often chosen specifically, so they leak additional information about the situation