Heuristics and Biases in Judgments

1
Heuristics and Biases in Judgments

• Representativeness

Jack
Flipping a coin
The letter R

• Anchoring and Adjustment

Example
Price endings
1.99 vs. 2.00

• Framing

2
Heuristics and Biases in Judgments Misconception
of chance
Flip a fair coin
1) HHHHHHHHHTH
2) HHHTHTHHHTH
People expect that a sequence of events generated
by a random process will represent the essential
character of that process even when the sequence
is short -- gamblers fallacy
Back
3
Heuristics and Biases in Judgments Prior
Probability
Most subjects judged the probability that Jack is
an engineer to be about .85 regardless of the
ratio 30 to 70 or 70 to 30
Back
4
Heuristics and Biases in Judgments Availability
Consider the letter R. Is R more likely to
appear in the first position of a word or the
third position of a word?
Ease with which specific instances can be
recalled from memory affects judgments of
frequency
Frequency of well-publicized events are
over-estimated (e.g., deaths due to homicide,
cancer) frequency of less well-publicized events
are under-estimated (e.g., deaths due to asthma
and diabetes)
Back
5
Heuristics and Biases in Judgments
You will have exactly five seconds. Please
estimate the value of the following expression
12345678 512
12345678
87654321 2250
87654321
40,320
Back
6
Heuristics and Biases in JudgmentsFraming
Fungibility money has no labels
Imagine that you have decided to see a play and
paid the admission price of 20 per ticket. As
you enter the theater, you discover that you
have lost the ticket. Would you pay 20 for
another ticket?
Y46, N54
Imagine that you have decided to see a play where
admission is 20 per ticket. As you enter the
theater to buy your ticket, you discover that
you have lost a 20 bill. Would you still pay
20 for a ticket for the play?
Y88, N12
7
Heuristics and Biases in JudgmentsFraming
Mental accounting
You set off to buy a clock radio at what you
believe to be the cheapest store in your area.
When you arrive, you find that the radio costs
35, a price consistent with your priors. As you
are about to make the purchase, a reliable
friend comes by and tells you that the same
radio is selling for 30 at another store ten
minutes away. Do you go to the other store?
Now suppose instead of a radio you are buying a
TV for 600 and your friend tells you it is
available at the another store (ten minutes away)
for 595. Do you go to the other store?
8
Heuristics and Biases in JudgmentsFraming
Consider the decision maker that wants to
maximize pleasure (gains of some sort) and
minimize pain (losses of some sort). How would
this decision maker frame outcomes to achieve the
hedonically optimal effect?
Segregate Gains Football pool and lottery
Integrate Losses silk blouse and tail-ended
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