Chapter 1. Decision Making

1.1 Introduction

Cognitive Tool Kit
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Decision Making

This experiment is based on work by Kahneman & Tversky, two cognitive psychologists who have done a great number of experiments dealing with decision-making phenomena. They were able to identify a number of errors humans are prone to making for example, representativeness, availability, anchoring, and adjustment that all clearly show that humans do not obey the laws of logic when making decisions. This work eventually led Kahneman to win the Nobel Prize in economics because much of their work had great relevance for investment behavior. (Unfortunately, Tversky had passed away before their work was credited by the Nobel committee.)

References:

Tversky, A. & Kahneman, D. (1973). Availability: a heuristic for judging frequency and probability. Cognitive Psychology, 5, 207-232

Kilger, D. & Kudryavtsev, A. (2010). The availability heuristic and investors’ reaction to company-specific events. Journal of Behavioral Finance, 11(1), 50-65

Kahneman, D. (2003). A perspective on judgment and choice: mapping bounded rationality. American Psychologist, 58(9), 697-720

1.2 Experiment Setup

1.3 Instructions

Instructions

You will need to press the space bar to start the experiment. A word problem will appear on the screen. Read the problem and provide an answer in the blank provided. After you’ve answered the problem, another will appear.

1.4 Experiment

Start Experiment

1.5 Results

Results

1.6 Quiz

Quiz

Question 1.1

EGGqP+qBcLjReGEPYOfN/0yJ9D/8s4/Eb8P2PO+BGsrW5I2lYt9oHDrCChplEVNv9MrEmT9X8Wuwl5HVBE4Zgp2pWm1C2Q8oQn9moskxzMw+sdIckbbwGi/VxNQwyuPbFMJTot+rcDB+OJFP3IO8n+N8iDwbswY3Qmr4vObk1mdmqFxlpHVVF2Yjsblb5193DSxKMiG2L2Tgjniqnjpbz8Cq57ApTsudq2TdWp9eMgbY9ZEnP94F2STuscJM0kvD9v0rvCFiLaghal7E5yaR80Bu+zFih1i9/y9+kFE39Ws5wAaCj7+i2WCIOOc31S2hUXEFstGvSNpL1NH5KZeb9Ec1GHp2C3D2YXdxnuZEYVQ=
Correct.
Incorrect.
The frequency of appearance of letters (R, V, K, L, N) in certain positions (first or third letter) in words is the variable measured in the first part of the current study. Tversky and Kahneman (1973) used the fact that individuals overwhelmingly assume that these letters appear more often in the first position rather than the third as evidence for their availability explanation of human decision-making.

Question 1.2

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1
Correct.
Incorrect.
Tversky and Kahneman’s availability heuristic was tested in the current study. These authors contend that people make many decisions based on the number of examples they can think of. In the first part of the experiment, participants guessed that all of the letters used were found more often as the first letter in a word rather than in the third position because it was easier to think of words in which that letter was found at the beginning.

Question 1.3

kjz8QXhHpb3WFxxjY2YQZfQI9+HE5l6VpceeIjnZn902BF8JafGBGzwYrh9SAD9eXsul2BKpwynD4IPNHWSrPkoP6bPTghlM0ORpOcMFL96jaEL9qK5a+6k3cCZ2Fb1xYHJS5i/xZ0FwWWYY7oYDkh6AvjhXd3mH+Dbec0+BmeaR3mv9D2RD9M1sj6syUvpq7yTVIGkdup+Ql+f7C0uwlITawadl73enhVtJs0n+RnPoOJ4Dinp0CD5XeTqbXX7oLH6D7vgXj/FzGbh+Cn0z4O3xK7XF/mvd
1
Correct.
Incorrect.
The answer is none of these because there is no independent variable in either part of this study. The experimenters did not manipulate the variable of interest (position of letters in words or ordering of a factorial equation) in the traditional sense.

Question 1.4

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1
Correct.
Incorrect.
The correct answer is decision-making. Tversky and Kahneman are renowned for their work on the nature of human thought patterns while performing decision-making tasks. This field, along with others like problem-solving and logical reasoning, is part of the cognitive topic area known as higher-level processes.

Question 1.5

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1
Correct.
Incorrect.
The correct answer is economics. The work of Tversky and Kahneman has applications for this field, in particular for investment behavior.