PSYB10H3 Lecture Notes - Lecture 3: Observational Error, Metacognition, Forego
Lecture 3: Heuristics and Biases
Deciding Well
• Decisions are easier when we can predict the future.
• We can best predict the future by making sound \inferences.
o Is this going to lead to a good outcome for me?
• How do we typically form these inferences?
• What errors do we make?
• e’e tig to ake peditios aout the futue he deidig
• we need or draw a conclusion from the data that is available to us to make inferences
• \Errors can help us make better decisions or inferences in the future
Designing Choice Environments
• When we are designing better ways to make judgments and decisions, we have
to understand which errors people typically make
o Formatting helps a lot
• We can help other ppl make better decisions
Heuristics
• Process information
• Mental shortcuts/rules of thumb for making judgments
o Simplify decision making
• Heuristics save time
o Save mental energy
• Heuistis ae good eough uh of the tie
o Adaptive to our time process
• Heuristics are prone to systematic error
o Study errors to illuminate how heuristics actually work and how we can mitigate
these problems
• Adapted for our decision making environments
• Less mental energy used
Availability Heuristic
• We are more likely to overestimate the likelihood, frequency, and causal impact of
things that:
1. Have Come To Mind Frequently or Recently
2. Are The Focus Of Our Attention
3. Spring Easily To Mind
a. In order to make a certain judgment
1. We are more likely to overestimate the likelihood, frequency, or causal impact
of things that e’e thought of frequently or recently
a. Causal means how important it is in causing something
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• I a 997 sue, oe tha 5% of Aeias disageed that This out is fiall
egiig to ake soe pogess i solig the ie pole.
o Crime had decreased for 6 straight years
o Judgments out of sync with evidence
• In a 1999 survey, 62% of Americans agreed that school children are getting more
violent.
o School violence rates remained stable through the 1990s
• Insanity defense used less than 1% of the time, but because we hear about it so much,
it’s fesh i ou eoies
o Insanity defense is also used a lot in media
• From oct to dec accident frequency is higher in 2001 than 1996-2000
• 9/ → planes and world trade centre
o Ppl avoided flying cause planes seemed dangerous at the time and started
driving more
o A lot more fatalities in car accidents
o Coseuee of ppl akig judgeets → had severe consequences
• Earbuds are memorable in the feature
• Ppl are making judgments about how popular the device is to buy it
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Economic Decisions
• Hearing only about lots of people getting rich by investing in real estate makes it
seem impossible for real estate values to decline
• Hearing only about the economy getting worse may make the economy get worse (by,
for example, encouraging businesses to cut costs and forego risks)
2. We are more likely to overestimate the likelihood, frequency, or causal impact
of things that are the focus of our attention
• When you have to do mental work to unpack a situation into its constituent
parts
Purchasing Insurance
• Suppose you are planning to fly to London next week. You are offered a
flight insurance policy that will provide $100,000 worth of life insurance in case
of your death due to:
o Any act of terrorism
o Any non-terrorism related mechanical failure
o Any cause
• How much would you pay for this coverage?
o When you ask separate groups of ppl this question
o Get logically consistent answers
• Ppl ae’t unconsciously unpacking the insurance package into its constituent parts
• Whe oke do → irrational answers
Reasons for Decreasing # of Customers
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Document Summary
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