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estimation of correlation underestimation of high correlation, vice versa estimation in extrapolating nonlinear trends toward more linear (fig 8.3)
under time stress more info deteriorated decision making performance selective filtering strategy compete for the time available for the integration of info more info leads to time consuming filtering process at the expense of decision quality Cues are Differentially Salient the salience should be directly related to the info value of the cue in making a decision, not just detecting a fault the info that is difficult to interpret or integrate underweighted the absence of a cue what is not seen, symptoms not observed Processed Cues Are Not Differentially Weighted do not effectively modulate the weight of a cue based on its value as if they were of equal value reducing the cognitive effort required to consider different weights weighting varies in more of an all or none fashion (fig 8.5) why use as if heuristic? cognitive simplification
Belief Changes Over Time: Anchoring, Overconfidence, and the Confirmation Bias
Overconfidence Bias overconfident in their state of knowledge or beliefs will not be likely to seek additional info (which may refute the hypothesis), even when it is appropriate to do so
Anchoring Heuristic not all hypotheses are treated equally mental anchor to the initially chosen hypothesis first impressions are lasting primacy in memory recency effect in cue integration primacy is dominant when info sources are fairy simple and integration procedure is one that calls for a single judgment of belief at the end of all evidence (sequentially) if the sources are more complex and often require an explicit updating of belief after each source is considered, then recency tends to be more likely (simultaneously) The Confirmation Bias a tendency for people to seek info and cues that confirm the tentatively held hypothesis or belief, and not seek those that support an opposite conclusion of belief cognitive tunnel vision three possible reasons 1. greater cognitive difficulty dealing with negative info than with positive info 2. higher cognitive effort to change the hypothesis 3. influence the outcome of actions taken on the basis of the diagnosis, which will increase their belief that the diagnosis was correct self-fulfilling prophecy
CHOICE OF ACTION
Certain Choice (fig 8.7)
compensatory method satisficing rule good enough EBA (elimination by aspects) reduce the cognitive effort, satisfactory Choice Under Uncertainty: The Expected Value Model (fig 8.8) costs and values (benefits) maximizing the expected value of a choice 1. Ps (probability of the state of the world) * Vxy (outcome value) 2. the expected value of each option 3. the greatest expected value as a choice complicating factors to human decisions under uncertainty 1. maximizing gain/minimizing the loss minimizing the maximum loss 2. difficult to assign objective values to different outcomes safety 3. subjective estimates of objective values irrelevant to objective values 4. inconsistency between peoples estimates of probability and the objective probabilities
prospect theory (Kahneman and Tversky, 1984): potential loss exerts a greater influence over decision-making behavior than does a gain of the same amount loss aversion both positive and negative limbs are curved toward the horizontal -- perceived value of Webers Law of Psychophysics Perception of Probability kahneman and Tversky a function relating true prob. to subjective prob. three critical aspects for understanding risky choice (fig 8.10) 1. subjectively overestimate of the probability of very rare events insurance and gamble 2. flat slope of its low probability end reduced sensitivity to probability change 3. perceive probability as less than actual probability framing effect The framing effect peoples preference with a choice between a risk and a sure thing risk-seeking bias between negatives (avoidance-avoidance conflict) risk-aversion bias between positives (risk and sure thing) change in loss or gain, depending on the neutral point or frame of reference for the decision making framing effect (frames of reference) sunk cost bias Rationally, the previous history of investment should not enter into the decision for the future. Yet it does. investors for poor previous decision sure loss and risky loss newcomer sure thing option is neither loss nor gain -- 0 utility and expected loss bias to terminate the investment
Proceduralization
a technique for outlining prescriptions of techniques that should be followed to improve the quality of decision making fault tree and failure modes analysis successful in certain real-world decisions that are easily decomposable into attributes and values