Exam 4 Decision Making

Exam 4 Decision Making - Decision Making Decision Making...

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Unformatted text preview: Decision Making Decision Making • Choosing among alternative courses of action – Involves conditions of uncertainty – Involves judgments of probability – Can involve reasoning Utility Approach • Expected utility theory – Assumes that people are rational decision makers • Maximize expected utility (outcomes to achieve goals) • BUT…people do not always make decisions to maximize the probability of a good outcome Why people do not use the utility approach • Other influences – Heuristics (e.g., availability) – Poor knowledge of probability – Emotions • Example: Deal or no Deal 1 Decision Making Probability • Probability – measurement of degree of uncertainty 0 = won’t happen 1 = definitely will happen Most decisions are made under circumstances in which you are unsure. Are unsure of probabilities in terms of real life outcomes • People less able to comprehend intermediate levels of probability – .3 vs .4 Deal or No Deal • http://www.nbc.com/Deal_or_No_Deal/gam e/flash.shtml Deal or No Deal • Post et al. (2008) – Contestants’ choices are determined not only by the amounts of money remaining, but also by what has happened in previous rounds • Role of emotion • Perception of gains vs. losses Take risks in hopes of beating the odds because people don't want to feel like a loser. Some people think they came in with nothing so they can leave with nothing so they take more risk whereas others are risk adverse and don't take risk because they don't want to be a loser. 2 Decision Making How Emotions Affect Decisions • Expected emotions – Emotions that people predict that they will feel concerning an outcome Integral- emotions you actually feel at the time Incidental-Emotions caused by your personality or by others • Immediate emotions – Emotions that are experienced at the time a decision is being made – Integral and incidental People Inaccurately Predict Emotions • Kermer et al. (2006) – Gave participants $5 and told them that based on a coin flip they would win an additional $5 or lose $3 – Rated happiness at several time points • Before the experiment (baseline) • Before the coin toss (expected emotion) • After the coin toss (actual emotion) Kermer et al. (2006) • Results: – Participants ____________ what their negative feelings would be *Overestimated. Predicting your emotions about an outcome of a decision can be inefficient when making an actual decision because they overstimate their negative feelings 3 Decision Making Framing Effect • Decisions can depend on how choices are presented • Examples: – 80% fat-free vs. 20% fat – Deal or No Deal • “You have a 1 in 4 chance of having a million dollars in your case” vs. “You have a 3 in 4 chance of having an amount other than a million dollars in your case” Framing Effect • Tversky & Kahneman (1981) – Problem 1: Imagine that the U.S. is preparing for the outbreak of an unusual Asian disease, which is expected to kill 600 people. Two alternative programs to combat the disease have been proposed: Framing effects 72% selected program A • Tversky & Kahneman (1981) – If Program A is adopted, 200 people will be saved. – If Program B is adopted, there is a 1/3 probability that 600 people will be saved, and a 2/3 probability that no people will be saved. – Which program would you favor? 4 Decision Making Tversky & Kahneman (1981) – Problem 2: Same scenario with these alternatives: 78% selected Program D A and C are the same but differ in how they are framed. Program • If Program C is adopted, 400 people will die. • If Program D is adopted, there is a 1/3 probability that nobody will die, and 2/3 probability that 600 people will die. – Which program would you favor? Tversky & Kahneman (1981) *saved *lost • Problem 1 is framed in terms of lives _____, which makes people risk averse • Problem 2 is framed in terms of lives _____, which makes people risk taking Neuroeconomics • The neural basis of decision making – Sanfey et al. (2003) • Collected behavioral and physiological data as people played the ultimatum game – Utility theory • Predicts responder should accept any offer • BUT…http://www.youtube.com/watch?v=YXfEv -xEWtE Ultimatum game- Proposer and responder and proposer makes an offer and responder accepts and gets the deal or rejects and no one gets anything. Game over when responder accepts. Tried this with people and also computers. Predicts that the responder will take any offer but doesn't happen unless the offer is fairly even 5 Decision Making Sanfey et al. (2003) • Results: *Low They are more likely to accept an unfair offer from a computer than another human – _________ by humans were rejected Sanfey et al. (2003) • Results: *Emotional-Activated more when you reject than accept *Cognitive- – Right anterior insula represents the _________ goal of resenting unfairness – Prefrontal cortex represents the _________ goal of accumulating as much money as possible The Physiology of Thinking • The prefrontal cortex plays a central role in thinking: – Planning future activities – Act with flexibility (perseveration) – Problem solving – Deductive reasoning – Planning, reasoning, and making connections among different parts of a problem or story 6 Decision Making Eisenegger et al. (2010) • Do people with more testosterone make riskier decisions? – Gave women either testosterone or a placebo and had them play an ultimatum game – Also asked whether they believed that they had testosterone or the placebo Eisenegger et al. (2010) • Results: – Those who had received testosterone made _________ offers – Those who believed they had received testosterone made __________ offers *Fairer- contrary to stereotypes *Unfair Biological factors and psychological factors play roles in decision making 7 ...
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