06.02_Thinking1 - Do more words Begin with the letter R or...

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© S. J. Luck All rights reserved 1 © S. J. Luck All Rights Reserved Thinking I Do more words: Begin with the letter R or have R as the third letter? Which is a more common cause of death? Diabetes or homicide? Tornado or lightning? Which kind of cancer is more common? Breast cancer? Prostate cancer? There are more than 5 countries in Africa How many are there? The population of the U.S. is approx. 300 million What is the population of England? A fair coin is Fipped 8 times. Which is more likely? H H H H H H H H or H T T H H T H T A fair coin is Fipped 7 times, and it was H on all 7 Which is more likely on the 8th toss, H or T? Which would you prefer? I give you a $10 bill I give you a lottery ticket with a 1/100 chance of winning $1000 The new Toyota EcoStar has a hybrid engine, ultra low emissions, and is marketed to women. Which is more likely? The EcoStar is a large truck The EcoStar is a large truck with good gas mileage • Decision-making – Deciding what to do – Which car should I buy? • How do people actually make decisions? – Do people make decisions in an optimal way? • Judgment – Drawing conclusions about facts – How many countries are in Africa? • Heuristics for drawing conclusions – Necessary, but may lead to systematic errors • Normative models: Classical decision theory – Strongly inFuenced by Economics & Philosophy • AKA - Rational models of thinking – What would it take to make the best possible decision? • The “Rational Decision Maker” – The decision maker is fully informed of all possible outcomes of the decision – The decision maker uses all relevant information – The decision maker is in±nitely sensitive to differences between possible outcomes (however subtle) – The decision maker always selects the outcome with the best expected value • Choosing among Harvard, Berkeley, and ²resno State • Need to know all costs and bene±ts (outcomes) – Tuition and cost of living – ²inancial aid – Enjoyment of educational experience – Enjoyment of local culture – Expected income after degree – Etc. • Combine all of this information in a manner that reFects the importance of each factor • Base decision solely on the above
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© S. J. Luck All rights reserved 2 • The concept of “expected value” (EV) dominates rational decision-making models • Expected value is calculated by multiplying the probability of each possible outcome by the value of that outcome and then summing them all together • Example 1: Coin Toss – Win $100 for heads, and lose $100 for tails – EV = .5 x $100 + .5 x -$100 = $0.00 – If you do this an inFnite number of times, you would be
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This note was uploaded on 11/08/2010 for the course PSC PSC100 taught by Professor Luck during the Spring '10 term at UC Davis.

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06.02_Thinking1 - Do more words Begin with the letter R or...

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