Jun 12 - Hot hand phenomenon Representativeness...

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Hot hand phenomenon Representativeness Availability What is the probability of a tornado? How frequently does a tornado occur? If we can easily generate examples of a tornado from memory, we think it is more likely In judging how often things happen, we rely on our memory Because emory is influenced by things other than frequency, we make mistakes In particular, we act in ways inconsistent with the normative standard of probability Availability Examples Consider these pairs of causes of death: Lung cancer v. motor vehicle accidents Emphysema v. Homicide Tuberculosis v. Fire Comparison between memory and which one someone chooses is partially related Availability Tversky and Kahneman even 'experts' can be led astray Utility Theory Foundation of economic thought (at least it used to be) People seek to maximize utility and minimize bad stuff Reasoning about losses and gains 50% of 200 or 100% of 100 In terms of expected values, both are equal 200 * .05 = 100 100 * 1 = 100 Utility theory predicts that people will be indifferent But, people consistently rate the sure thing as highly preferred. Framing Effects Reasoning is powerfully influenced by whether problem is framed in terms of losses or gains If frame emphasizes loss, risky decisions, if emphasis is on gains, risk averse If decision is framed in terms of gains: people are Risk avoiders They protect a smaller gain rather than gamble on a larger gain
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This note was uploaded on 06/18/2008 for the course PSYC 1101 taught by Professor Leader during the Spring '07 term at Georgia Institute of Technology.

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Jun 12 - Hot hand phenomenon Representativeness...

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