Overall Summary of Judgement and Decision Making!

For our final piece of coursework for judgement and decision making we had to do a group presentation. Our group chose to do Utility and the three of us looked at different articles. Mine was on dissecting the risky choice framing effect by Peters and Levin (2008). This article looked at the 5 Variants Asian choice disease, first proposed by Kahneman and Tversky (1981) which was an early example of the malleability of human decision making. The main point of the article was to look at the differences framing has on the highly numerate participant’s and the less numerate participant’s. Overall the less numerate showed a greater susceptibility to the framing.  During the presentation I had to analyse and summarise this article. For me I have found judgement and decision making to be very interesting yet challenging. The reasons why people make different judgements and decisions based on cognitive processes. Are they risk adverse or risk seeking? Why do people make certain decisions? What variables affect decisions? For me personally I think that there are many individual factors in making decisions, such as what the consequence of that decision will be. One must keep in mind that most decisions are made unconsciously. Jim Nightingale, Author of Think Smart-Act Smart, states that "we simply decide without thinking much about the decision process."  There were therefore many aspects of decision making that I found interesting such as probability and utility theory, and the way in which a choice is framed affects an individual’s decision.  From judgment and decision making I have learnt that my intuition when it comes to making my own decisions (especially in probability) are quite inaccurate. However I have also learnt that I am not risk seeking.

Overall Judgment and decision making has opened my eyes about the way in which I make decisions and has made me more aware of the individual factors that affect individual’s decisions. There are so many numerous psychological factors and events within decision making, including moral intuitions and performance, intuitive and heuristic modes of evaluating and choosing, conscious reasoning modeled after Western logic, and the factors and biases that affect one's choice of choosing method and the performance of the method itself. As with all mental processes, within this general topic are the cognitive and biological factors that control the uses of the various psychological processes in regards to decisions.

Overall Summary of Article!

Dissecting the Risky-choice framing effect: Numeracy as an individual-difference factor in weighting risky and riskless options. Peters and Levin (2008)

This article using the variants of the Asian Disease Problem tried to dissect the risky-choice framing effect. This demonstrated the way in which choices in decision making are advertised, based on whether they are positively or negatively framed. Whereby the participants had to provide preference ratings for the full decision problem and provide attractiveness ratings for each of the component parts i.e the sure-thing option and the risky option. Overall findings showed that the risky choices were made by participants choosing the negatively framed versions. During this article it looked at participants with differences in their numerate levels. Some were highly numerate and some had low numeracy. The results showed that the less numerate had a large effect of frame above and beyond their options, whereas the high numerate were almost completely accounted for by their attractiveness ratings.

Numeracy refers to the ability to understand and use mathematical and probabilistic concepts. In the US approximately half the population has difficultly with simple numeric tasks. Therefore it is not surprising that greater ability with numbers leads to more comprehension of numeric information in important decisions.

Peters et al (2006) Found that high numerate participants being more likely to retrieve and use appropriate numerical principles. And transform numbers in one frame to another.

There were 4 hypothesis is this article, but the main one was to replicate the Risky-choice Framing effect and that the risky choice rather than the sure-thing option will be preferred. Which ultimately it was found in the results.

During the task the participants were assigned to a positive or negative frame. There was a full scenario task and the participants had to rate the attractiveness of the Sure thing and Risky choice option. They were then asked to fill out a demographic from which aimed to discover whether they were highly or less numerate.

It was found that because the less numerate are less able to translate, therefore their results will be less reliable. Although the less numerate showed a larger framing effect. Alternatively the highly numerate understood the choices and numbers more effectively, therefore made more accurate and complex decisions.

Overall this shows that people who have greater numerate skills are able to integrate complex numerical information in the construction of their preferences as they have a greater working-memory capacity. Therefore there are individual factors in weighting risky and riskless options.

Article Notes for presentation!

Dissecting the Risky-choice framing effect: Numeracy as an individual-difference factor in weighting risky and riskless options!

Peters and Levin (2008)

Introduction

This journal using the variants of the Asian Disease Problem tried to dissect the risky-choice framing effect. This demonstrated the way in which choices in decision making are advertised, based on whether they are positively or negatively framed. Whereby the participants had to provide preference ratings for the full decision problem and provide attractiveness ratings for each of the component parts i.e the sure-thing option and the risky option.

Numeracy moderates framing effects:

Numeracy refers to the ability to understand and use mathematical and probabilistic concepts. In the US approximately half the population has difficultly with simple numeric tasks. Therefore it is not surprising that greater ability with numbers leads to more comprehension of numeric information in important decisions. Statistics showed (national adult literacy survey) that half the general U.S population has difficultly with simple numeric tasks. Although these individuals may not perceive themselves as ‘at risk’ in their lives due to limited skills, research suggests that that having inadequate numeric skills is associated with lower comprehension and use of numeric information in health and financial domains. Therefore it is not surprising that greater ability with numbers leads to more comprehension of numeric information in important decisions. This shows that Numeracy relates in somewhat less intuitive ways to a variety of cognitive and affective biases.

Peters et al (2006)

Numeracy’s effects on framing of a single attribute by presenting participants with the exam scores of 5 psychology students and asking them to rate the performance of each student on a 7- point scale from -3 (very poor\0, to +3 (very good). The framing of the exam scores were manipulated as either percent correct or percent incorrect. 74% correct vs. 26% Incorrect.

From this it was found that high numerate participants being more likely to retrieve and use appropriate numerical principles. And transform numbers in one frame to another. The highly numerate appeared to integrate more sources of information then the less numerate. Alternatively, in prior studies of numeracy, highly numerate individuals have demonstrated deeper processing of numeric information by showing smaller framing effects.

Vs Garcia (2006)

Garcia examined the risky-choice paradigm, and found no effect of numeracy’s influence on attribute framing. Therefore because of this it is curious that numeracy did not influence risky-choice framing effects in s similar manner with greater effects of the provided frame on the less numerate.

Example

The Sure thing option offers a fixed (riskless) outcome. In the Positive framing condition it is ‘save 200 (out of 600) lives’ whereas in the Negative condition it is ‘400 will die’. The Risky option offers a ‘one-third chance that no one will die and a two-thirds chance that all will die’ in the Negative condition.

Experiment

During the task the participants were assigned to a positive or negative frame. Where they have to provide preference ratings for the full decision problem, and also to provide attractiveness ratings for each of the component part i.e the sure-thing option and the risky-choice option.

They were then asked to fill out a demographic from which aimed to discover whether they were highly or less numerate.

Results

It was found that because the less numerate are less able to translate, therefore their results will be less reliable. Although the less numerate showed a larger framing effect. Alternatively the highly numerate understood the choices and numbers more effectively, therefore made more accurate and complex decisions.

Discussion

Overall findings showed that the risky choices were made by participants choosing the negatively framed versions. During this article it looked at participants with differences in their numerate levels. Some were highly numerate and some had low numeracy. The results showed that the less numerate had a large effect of frame above and beyond their options, whereas the high numerate were almost completely accounted for by their attractiveness ratings.

Therefore ultimately this shows that people who have greater numerate skills are able to integrate complex numerical information in the construction of their preferences as they have a greater working-memory capacity. Therefore there are individual factors in weighting risky and riskless options.

Co-operation and Co-ordination!!

This week we were introduced to the idea of Game Theory where this is about probabilities and outcomes, but mainly about interactive decisions/judgements. It is trying to work out what sort of strategies people arrive at. This is where the Nash Equilibrium and the prisoner’s dilemma came into play.

The Nash Equilibrium was derived by John Nash and suggested that we as people are self-interested and in the prison dilemma. Looking at the example of the Nash Equilibrium got me to thinking, would I rat out my spouse for a smaller sentence? Therefore the Nash equilibrium is a combination of strategies that cannot be improved upon.

Another example of co-ordination in regards to people’s actions was the example where to people have met and decided to go for coffee, however both cannot remember where it was they were supposed to meet. In reality there are places even without discussing things people gravitate towards. These are called shelling points. These are places that are intuitively obvious, so therefore people tend to gravitate towards.

Another topic in class we looked at was that of competitiveness amongst people. Are we born with it, or do we learn it? It is my belief that we are born with in. In evolutionary terms animals would always compete to be the alpha male and to mate with females. However it is my belief that with humans that main reason we are so competitive is because there is such inequalities within society. How can we not compete with one another when everybody is different? If we all lived in the Amish where everyone dresses equally and nobody gets paid. And they all work together as equals to work at their community. Then there would not be any need for competitive behaviour. Although realistically we do not live in a world that is equal, therefore it will bring out people’s competitive nature.

There was an example given in class of a clip from the film ‘Rebel without a cause’. And the example was the Chicken game. Where these two boys had to drive towards a cliff and the first person to bail out of the car was the loser. It resulted with a person dying. This example showed how risk and competitiveness can be taken too far. Another such example was that of the Cuban missiles and the almost nuclear was between America and the Soviet Union. Both didn’t want to back down. However in the end the Soviets didn’t fire on the Americas and no war was started.

This shows how competitiveness and can result in drastic behaviour and unnecessary risks.  

Preferences and Decisions!!!

This week we looked at people’s preferences when making decisions. And how peoples preferences are different based on the gamble, as generally people tend to prefer the gamble with the higher probability. A theory behind this notion is Choice Intransitivity (Tversky, 1969). Choice Intransitivity has 3 dimensions, intellectual ability, emotional stability and social facility. And is the best way of choosing candidates as it violates the assumption of Utility Theory.

Lictenstein and Slovic, 1971 looked at explanations into why people are willing to pay more with the highest potential outcome. The main reason was that when people are considering these proposed gambles, they find it hard to weigh up the probabilities and outcomes, however when actual money is involved an actual outcome is expected and predicted. Looking at the way the questions are portrayed also has a factor when people make decisions, like framing as most people would go for the higher probability question. This also backed up by Prominence Hypothesis as whatever question is more prominent will affect a person’s answer.

I am not a gambler, however given the example of 7/36 chance of winning £9 and a 7/36 chance of winning £9, but a 29/36 chance of losing 50p. I would definitely choose the second choice. However it has been proven that the more items to consider the more the more analytical people are.

Overall my own personal preferences when making decisions would depend on the strategy selection determined by personal and task factors.

Rational Choice and the Framing of Decisions:

This week was based on the article by Kahneman and Tversky (1986) Rational Choice and the Framing of Decisions. Which is a modern theory of decision making under risk  and uncertainty and also shows alternative descriptions of a decision problem often give rise to different preferences, contrary to the principle of invariance that underlies the rational theory of choice. The article introduced the idea of framing which is basically the same option just presented in different ways, and how this affects and can change people’s decisions. Specifically individuals who make inconsistent choices that usually depend on whether a question is framed in a way that suggests a win or lose scenario. Within the article it also introduces Prospect theory, which describes decisions between alternatives that involve risk i.e. where the probabilities of outcomes are known. The model is descriptive , and it tries to model real-life choices, rather than optimal decisions. During the article it looked at the different outcomes of framing and how something is portrayed that will affect the outcome and a person’s decision. The article also demonstrated the 4 principles of utility theory and looked at the failures of invariance (which was one of the 4 principles of utility theory). The conclusion from this was that violations of invariance are caused by framing effects i.e survival and death. Overall I found the article portrayed a good sense of rational choice in decision making. I felt that the example for the failures of invariance on lung cancer and different examples of treatments showed an accurate idea of how it is the way in which things are portrayed that can affect people’s decisions.

Decision Making!!!!

Decision Making Under Risk and Uncertainty!

This week’s topic was on decision making under risk and uncertainty.  In class we had to find our personal point of indifference in making a decision between a choice that is certain and a choice that would be taking a risk. I always thought of myself as someone who would take risks, however I found that in class I went for the certain choice. We looked at theories and the Allais Paradox was the one I found most interesting where you have a choice between A and B. A£I,000,000 for sure or B. 10% Chance of getting £5,000,000 and 89% chance of getting £1,000,000 and 1% chance of getting £0. I chose A for certain.

I believe that decision making is evident in nearly everything we do. From the everyday to the consequential, our lives are governed from the decisions that we take. Therefore it is difficult to understand the factors about how we make decisions. When understanding decisions you need to understand and be aware of how various factors may have had an influence on past decisions, and so that we may be able to improve upon future decisions.

Because decision making is so central to our lives, it is not surprising that it receives research

attention from a wide range of disciplines: cognitive psychology, economics, political science, marketing, social psychology, engineering, philosophy, and more. I therefore have come to the conclusion that I myself tend not to take too many risks when making a decision.