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Thinking and Decision Making (PSYC)


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Authority as a Persuasion Tool
is Rule IV of Cialdini’s Rules of Behavior. It is a subset of Persuasion and Social Influence, which is a part of the Social Side of Judgment/Decision Making. It states that people tend to follow directives, advice and instructions if given with the proper authority. Proper authority can be determined/falsely established by an external quality like a person’s status, or seeming expertise. Examples of authority figures might be physicians, professors, CEO’s, politicians, etc. The societal benefit is that it increases coordination and takes less time. This can be very useful for non-egocentic social goods. An example might be the simple fact that a student will (probably) believe a professor is telling the truth during lecture.
-Ways to Signal Authority (ie, make use of the influence principle) is to engender a perception of authority. An example might be is to wear a lab coat. Other might be awards, degrees, physical characteristics (age, posture), role emblems (bling). Another method is to remove self-interest to increase the perception of others’ interest.
-Times when Authority fails is when there is an illegitimate authority, with a lack of expertise or a mis-entitlement of allocated incentives. This might be done for self interest, or outside their expertise. The problems is that a person will suspend his/her own judgment and follow an authority’s instructions blindly.
Backwards Induction
is related to the Beauty Contest game and the Coin Flip-Die Toss game. It describes a series of steps a person might take to think “backwards,” when considering the effects that the knowledge and incentives of others (and yourself) have on the ultimate outcome in an interdependent situation. The result is the people typically think about anywhere from 0 to 2 steps. An example of this type of behavior can be described in the idea, “well, if I know this piece of information, then the other person must be thinking of it also. Therefore, I should change my decision to optimize my outcome.” The problem with using backward induction is that a person might infinitely regress, like Wally Shawn in the Princess Bride.
Behavioral Game Theory
is the descriptive theory for decisions with outcomes that depend on the decision/actions of others, AKA strategic games. Hence, it becomes necessary to predict other people’s behavior. One example would be the Beauty Contest Game, which is a situation where the winner is the determined by the person who picks 2/3 of the average number. While the rational, Normative theory says that people should choose 0, behavioral game theory shows that there is no clear, correct strategy. The game is contingent on the rationality of others, but some are more rational than others.
Behavioral Traps
are situations where a person starts on a promising action that becomes less and less desirable. One example might be put on hold on the telephone. Another might be bidding on EBay.
Constant-sum and variable-sum games
describe one type of interdependent payoff game in strategic games. They are characterized by different payoff values depending on which alternative is chosen. For example, the Stag Hunt and the Battle of the Sexes are both variable sum games, because the outcome for cooperating is higher (although varied) than the outcomes for defecting.
is just one of the outcomes of a repeated, strategic game. In the prisoner’s dilemma, cooperation (both defect) is NOT the rational strategy, especially due to backwards induction. Hence, the tendency for a 1-round game of the Prisoner’s dilemma results in both people defecting (confessing). The alternative (to cooperate & not confess) outcome is preferable, but is not the logical choice. Reputations can help lead to cooperation in repeated games. Discussion can raise cooperation.
are acts of omission. It the process of avoiding a behavior because it’s unpleasant in the short term, but it becomes much more unpleasant to deal with later. An example might be not cleaning; after weeks of not cleaning, the task becomes much more time-consuming and effortful than if one had just been cleaning all along.
Dominant strategy in a game
describes the ideal method in a strategic game. A dominant strategy is determined when one option produces the best outcomes, regardless of what the other person chooses.
Endowment Effect
is a consequence of prospect theory value function, which is a descriptive model for risky choice tasks. It describes the tendency to add value to things we own as a result of loss aversion. For example, when 1 group is asked for a selling price, and the other group is asked for an acceptance rate, the latter group offers a much higher value for it. This is especially true for objects of sentimental value, because the loss of a certain object is perceived as more negative than the gain of the same object is positive. Ownership endows value. Hence, it is good to be aware of irrational demands that are the result of the endowment effect.
is an Egocentric Bias, and is a subset of Framing. It describes the belief that others are much more similar to us in preferences and values than is true. This usually follows the thought process, “What would I do?” and then, attempts to adjust from that conclusion. This leads to anchor problems; we do not adjust enough.
Fear and greed as motives in social dilemma
fear and greed have been identified as two reasons for people to defect (not contribute/cooperate). Participants fear that others will not participate, so they try to save themselves. Greed can also be a motivating factor because participants realize that they can get more out of the situation if they defect. Greed is more important than fear in causing free-riding.
Free riding
economic theory predicts that when people are provided with public goods, people will try to take advantage of them and “free-ride.” The weak free-rider hypothesis says that only some people will free-ride, which will lead to sub-optimal results, but not a total loss of resources. For a single play, public goods are usually maintained with about 40-60 percent cooperation. (This is not true for economists.) In a multiple-round public goods experiment, cooperation declines sharply.
Fundamental Attribution Error
is a subset of Egocentric Biases. The Attribution Theory was developed by Heider and Kelly, who reasoned that behavior and its consequences can be causally explained by different causes, whether it is the person’s personality (she’s always late,) or a situational problem (traffic). Attribution errors are not made consistently, and it describes the tendency to give undue attention/weight to incorrect explanatory factors. The cause is that reason for differential attention is partly cognitive and is partly motivational. Ross developed the Fundamental Attribution Error, which states that people are more likely to attribute other people’s negative behaviors because of their personalities, while we account for situational variants for our own failed behavior. (Blame others and Excuse selves.) This is because we know ourselves and our experiences. When explaining things with positive consequences, we tend to due the opposite and credit our personalities, rather than situational factors. Example would be the Sports Illustrated cover thing.
Group polarization
is a liability of Group Decision Making/Problem Solving, which is part of the Social Side of Judgment and Decision Making. This is when that the group’s existing beliefs become intensified because the group is in agreement. An example would be that a political group meeting might intensify their original beliefs.
is a part of the Social Side of Group Decision Making/Problem Solving. Groupthink is characterized by a number of behaviors or exhibited beliefs (COP). First, there is the Close-mindedness/Conformity. The group engages in collective rationalization and stereotypes out-groups. Next, there is Overestimation/Overconfidence of the group’s abilities. There is an illusion of vulnerability, which tends to be based on luckiness in past outcomes. It can also be assisted by a belief in the inherent morality of the group. Finally, there is the Pressure towards conformity. Group members may exhibit self censorship, and/or self-appointed mind-guards may put pressure on dissenters. An example of Groupthink would be the Challenger launch decision, which excluded dissenters (engineers) from the voting process; this lead to an unfounded order to launch the shuttle, and people were killed in the process. Some steps to protect against Groupthink can be described in the steps, LESSR. Leader should refrain from stating preferences and opinions at the beginning of the conversation; Encourage dissent and criticism; Set up parallel groups to consider the same issue; Set up institutionalized devil’s advocates; finally, Review group process with neutral outsiders.
Interdependent decision making
this is a subset of Game Theory, which is a normative model for decisions with outcomes that depends on the decisions/actions of other people. Any player in the game is affected by what others do. This can relate to payoffs, which means that one’s own payoffs depend on the decisions of others.
Liking/Affect as persuasion tools
is Rule VI of Cialdini’s Rules of Behavior. It is a subset of Persuasion and Social Influence, which is a part of the Social Side of Judgment/Decision Making. This can be described as the idea that things that make us feel good are good for us and should be approached (and the opposite is true, too). This has enormous motivational power, like pride, love, anger, attraction, etc. It can overwhelm reason, and it is also very difficult to change. Affect can create a disregard for other choice criteria, and it varies across individuals. Also, it causes a person to focus on the present, and disregard past and future. It is usually a good behavioral and choice heuristic, because you say away from things that scare you, do things you can be proud of, or approach people when attracted to someone.
-Affect comes from physically attractive people (halo effect), or people who are similar or have common interests (egocentric bias). This can lead to mirroring speech, flattery, touching, sharing information or things. Affect can also come from a decision.
-Ways to manipulate people through affect (Influence Principle). Try to induce positive feelings about the product/service, about yourself, and anticipate the joys of ownership. One can also try to induce negative affect about the alternative.
-When feeling is directed at object, it’s bad, but when information is taken from an object, it’s good – hmm?
-Negative Affect Avoidance: usually avoid things if we anticipate regret, are seeking guilt reduction, anxiety reduction, or have a fear of embarrassment.
-Positive mood makes people:
-enjoy things more,
-become more open to new ideas and things,
-more willing to take risks,
-less detailed in their evaluations
-Negative mood makes people do the opposite
-These effects are global and occur without awareness.
Luce's Choice rule
translates choice proportions for strong stochastic preferences into utilities. An example might be a list or a table of car preferences; the numbers represent the variability of utility for each comparison of options. Luce’s choice rule does not hold when options are similar, like if there is a comparison of 2 Beethoven CDs to 1 Debussy record. If they evaluated independently, each CD has the same weight, but when weighed together, the numbers do not predict 1/3 (equal weight across all options), but instead, show that the observed choice proportion is closer to ½ (as if there were only 2 options). This is because people bundle the two Beethoven together when compared to some totally different option.
Mental Accounting
is a Descriptive model of choice. It was first proposed by Thaler, and it describes the tendency to make separate mental accounts that are not fungible (not transferable). This is one solution to human constraints; since we know we have limited attention and limited processing capacities, we can use mental accounts to control behavior. An example might be a retirement fund; a person technically could take money out of it, or not create a fund at all, but it helps to allocate untouchable money. Mental Accounting can also be used in negotiations to reframe a position to make it appear more acceptable. For example, you could ask for concessions on a different issue, after you have already exhausted one. The problem is that we create sunk costs for ourselves.
Omission Bias
is a Descriptive model of choice. This describes the tendency for people to prefer to be wrong (and/or feel less regret) when a bad outcome is the result of a lack of some action (omission), rather than some action (commission). An example might be missing a question on a test because you hadn’t studied the material, rather than studying it and written down the wrong answer.
Prospect Theory
is a Descriptive model of choice, related to risky choice tasks. It was developed by Kahneman and Tversky, and it modified the expected utility model to include the psychological component relating to risky choice. Prospects are evaluated by a value function and decision weights. The value function is concave (risk-averse) for gains, but convex for losses (risk-seeking). The losses and gains are defined by some reference point, and losses always loom larger than gains. However, there is diminishing sensitivity for both gains and losses. After a certain point, losing/gaining more hardly makes a difference.
Public Goods
is related to social dilemmas. When resources are created, they are considered public goods. A public good is a shared resource; the consumption of the resource by 1 person does not significantly deplete the resources available to everyone. An example would be air: if a person breathes, there is still enough air to go around. Another example would be something like Public radio and Public television; they are available to everyone, and everyone assists them through donations or whatever.
Pygmalion Effect
this is when one person’s expectations for another person enhances their performance. One example might be a teacher who expects some students to do better than others; the select students may perform better because of the good expectations. This was true for the “Class Divided” video.
Scarcity as a persuasion tool
is Rule V of Cialdini’s Rules of Behavior. It is a subset of Persuasion and Social Influence, which is a part of the Social Side of Judgment/Decision Making. This describes the perception that rare things are often valuable, and valuable things are often rare. There is a link to loss aversion. (“I don’t want to be the one without…”) The competition implies value.
-The way to manipulate people (using the Influence Principle) is to increase a perceived value by restricting availability. This can be done through a limited supply, like creating limited edition/production good, or using controlled release (e.g. Harley Davidson’s). This can also be done through limited offerings, like time-sensitive offers or exclusive offers. Also it is helpful to increase the perception of competition for goods and services.
Self-fulfilling prophecies
AKA as Stereotypes, this is another Egocentric Bias, and is a subset of Framing. It describes a process in which a certain belief brings about that presupposed behavior. An example would be to assume that women are “lousy tippers.” This could lead to a waiter or waitress providing less attentive service to the women, and in turn, will give reason to leave a smaller tip. This also refers to the blue-eyed vs. brown-eyed “characteristics” that would ultimately reverse once the groups switched positions. This obviously refers to how a person might treat others differently according to a preconceived notion. To prevent this bias, it is important to try and switch perspectives with another person (“walk in somebody else’s moccasins.”)
Self-serving bias
is an Egocentric Bias, and is a subset of Framing. It is the belief that oneself is better one a wide range of performance variables than others. For example, when asked to determine the likelihood of developing a drinking problem, most college students respond by saying that they are less likely than others to develop a problem. This bias can be partly caused by attributional biases.
Social comparisons and utility
is a subset of Motivation. It describes the preference (AKA, it’s easier) for relative judgments over absolute judgments of quality. This means that the social context of our lives and decisions encourages its own type of relative comparisons; ie, our environment alters our judgments. Social Comparisons provide a reference point between oneself and another person. It can be summed up in the thought, “am I doing better or worse than someone else?” This type of thought can have different types of utility effects. For example, if you like a person, doing better may have a negative utility (feelings of guilt). But, if you dislike a person, doing better will have a positive utility. This is exemplified in Loewenstein, Thompson, and Bazerman’s findings in 1989.
Social dilemma
is a subset of behavioral Game Theory: it is like a large-scale version of the prisoner’s dilemma. When resources are depleted, this causes social dilemmas. (In contrast, when they are created, they become public goods.) The self-interest of a member conflicts with the interests of the group; when this selfish behavior becomes the dominant behavior among the group members makes everyone lose. This can be related to the Tragedy of the Commons. The rational this is not to contribute/be selfish, but if everyone does this, everyone is screwed. There are two types of actions for social dilemmas: to Cooperate, which is to engage in behavior that benefits the group, or to Defect, which is the action that benefits the individual. Defecting can also be thought of as free-riding. One example would be walking across grass, rather than taking the paths.
Social facilitation
is a subset of Motivation. It appears that the physical presence of others can alter our behavior and lead us to perform better. This only works for simple tasks, or tasks in which a person is already skilled in. We think that wanting to “look good” in front of others motivates people to work extra hard, and that the presence of others is an arousing factor. There is a performance curve that shows that an increase in arousal can lead to better performance; excessive arousal, however, would not.
Social loafing
is a subset of Motivation. It appears that the presence of others can lead to a diffusion of responsibility. There is the tragic example of Kitty Genovese, who was murdered and raped on the streets of New York. No one called the police or the ambulance because each person assumed that someone else had already taken care of the situation. This is like a “social” level of omission bias.
Strong free rider hypothesis
The strong free riding hypothesis says that everyone chooses the dominant strategy (ie, work according to rationally and act in their own best interests). This is true for economists when playing an altered version of the prisoner’s dilemma. One example of the strong free rider hypothesis is Wikipedia, which became such a huge resource that it necessarily had to ask for
Strong stochastic transitivity
is a Descriptive model for riskless choice tasks. Stochastic signifies that it is a probabilistic version of transitivity (80% of the time, I will choose chocolate over caramel). Strong stochastic transitivity is defined by p(a,b) ≥ ½, and p(b,c) ≥ ½, then p(a,c) is ≥ max{p(a,b), p(b,c)}. Weak stochastic transitivity simply states that if by p(a,b) ≥ ½, and p(b,c) ≥ ½, then p(a,c) is ≥ ½. Whenever p ≤ ½, then the preferences are random.
Tit-for-tat strategy
is where a person starts out cooperating, and continues to do so until the other person defects. Then, the other party defects. Basically, mimic the other person’s behavior. This is a way to ensure a higher payoff. This is a good method to use for an infinitely repeated game of the prison’s dilemma game. People have a tendency to cooperate until they suspect that the other party is taking advantage of them.
Maximin strategy
this is the strategy that is useful for games when you can assume what the other person will choose. It is a means to maximize the minimum payoff you can expect, given the other choice of the player. One example would be the rational pigs game; the dominant pig can expect the subordinate pig to stop pressing the lever, so he should always press the lever as a result. The maximin strategy can lead to a Nash Equilibrium.
Embedding Effect
the embedding effect is one of the liabilities of the contingent valuation methods, which is a subset descriptive models for risky choice. It describes the tendency for people to same the same amount to save one lake or 100 lakes. Hence, the amount willing to spend correlates to an attitude rather than a true price tag. This means that there is a clash between an economic model, which is dependent on the purchase price, or an sociology-psychology model of contribution, which is more descriptive of the person’s attitude.
Contingent valuation
contingent valuation describes the process of trying to find the value of something; one example would be asking people how much they value their clean water supply by asking how much money they would contribute to the cause, or how much pollution they would tolerate.
Compatibility principle
the compatibility principle states that certain methods of elicitation are more compatible with certain responses. This is largely related to issues of framing; when a question is asked differently, it can lead to preference reversals. Two standard ways of determining preferences are asking people to choose between two options, and the other is to ask them to set a price for how much they are willing to pay for either option. The results are that the choice frame generates a tendency for people to emphasize the chances to win a lottery, whereas setting a price to participate in a lottery with the higher payoff. This leads to the issue of which is the true preference. The utility elicitation method says that it is best to frame the situation in a manner that is most consistent to the way that utility or preference outcome information will ultimately be used.
Nash Equilibrium point in game theory
the equilibrium point is a point in a game when it is beneficial for either party to transfer out of a choice, given the other person’s actions. In a constant sum game, this can also be referred to as a Nash equilibrium. However, there can be more than one equilibrium, which we have seen in the stag hunt and the battle of the sexes game (both of which are variable sum games). In the stag hunt game, there was a risk-minimizing equilibrium point, where both parties would choose the hare. However, the payoff-maximizing equilibrium point is when both parties choose to cooperate and hunt the stag together.
is an alternative outcome to cooperation in strategic games. It is the dominant strategy for zero sum or constant sum games. For the prisoner’s dilemma, this is illustrated by the fact that each individual should defect if they are working in their best interests; however, both parties are missing out on even better options because they decided not to cooperate.
Elicitation Method Effect
describes the changes in outcome due to the elicitation method. It is related to the compatibility hypothesis and the utility elicitation method. This supports the notion of constructive preferences. When standard gamble method is used to frame questions, it takes the certainty equivalent into account. This is the process of asking a person to adjust the sure thing value of a lottery with a certain outcome of equal EV until they are equally valued. However, the probability method removes the certainty effect by comparing two lotteries and adjusting one probability level until two options are equally valued. One of the liabilities of the elicitation method effect is that it can lead to the embedding effect, which shows that people are not willing to spend more money for a larger amount of the same shared resource.
Decision weights in Prospect theory and the Certainty Effect
It is a subset of descriptive models of decision making. The certainty effect shows that the impact of moving from a certain outcome to an uncertain probability is much greater than decreasing the probabilities by the same constant amount. Prospect theory anticipates that decision weights will overweigh small probabilities and inflate the importance of improbable events.
Loss aversion in Prospect theory
prospect theory is a descriptive model of risky choice. It modifies the expected utility model to fit observed choice patterns. Loss aversion is one particular aspect of prospect theory that is lacking in expected utility. Prospect theory shows that the disutility of losses has a steeper slope than the utility derived from gains; hence, the loss by a constant sum feels worse than a gain by the same amount. Loss aversion describes the feeling that “losses loom larger.”
Procedure invariance
procedure invariance predicts that preferences should not change, regardless of the elicitation method. However, this has been proven to be non-descriptive of people’s behaviors, as shown by the elicitation method effect.
Minority Influence
describes the tendency for a consistent minority to have a significant influence on the group’s decision. This is related to the social side of judgment and decision making. One example would be the Ash conformity study; when there was at least one other dissenter in the group, the subject’s answers were less likely to confirm to the confederates.
Reference points in Prospect Theory
reference points are assigned a mathematical value of 0, and are meant to describe a neutral point. The reference point determines whether or not outcomes are determined as outcomes or psychologically coded as a gain or a loss. For example, this might be relative to a person’s current asset position. If a person is extremely wealthy, finding a $50 bill on the street will not make a huge difference to that person; however, if a poor college student find $50 on the street, this would be a serendipitous act!
Revealed Preferences
is a subset for descriptive models of choice. In order to determine other people’s preferences, we can try to infer their preferences from their behavior. We can do this by two modes: asking people to choose between 2 options, or having them put a price to determine their preferences and/or value. However, the problem with trying to determine people’s revealed preferences is that they might reverse depending on the elicitation method.
Social goals
some social goals are fairness, altruism, and affiliation. It describes the inclination to take the needs of others into account when making decisions. Social goals might also explain the reason why people contribute to public goods and do not always free ride.
Strategy in a game
is a course of action; can be described by either a row or column in a strategic game chart. For example, if you have a dominant strategy, that means that you will choose a course of action (as outlined by a row or column) regardless of the other person’s choice because it will consistently yield the highest payoffs.
Sure thing principle (AKA Cancellation principle) and its violation
according to the Cancellation principle, a choice between two alternative should depend only on how the alternative differ; in other words, whatever is a sure thing for both options should not affect the ultimate decision. However, this is violated by the Allais paradox, which set up two different decisions. First, there was one option that was a sure thing, and the second option was a lottery. In the second scenario, both options became lotteries, although rather than having a constant payoff proportion between the two lotteries, the payoff was changed to zero. Hence, the sure thing principle was violated because the majority of people chose the certain option in scenario 1, but chose the riskier, high pay option in scenario 2.

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