This week there wasn't a lecture. We have been reading up on our group subject which is Decisions from experience.
At some point next Friday we will be putting all of our ideas together, making it into a powerpoint presentation.
The paper we were reading for the power point presentation was 'Decisions From Experience and the Effect of Rare Events in Risky Choice' by Hertwig et al. (2004). This paper was rather short. They conducted a study at a university in Israel, presenting students with six decision problems. For example problem 1 was a choice between an 80% chance of getting $4 or $3 for certain. Half of the participants were put in to the experience group where they were allowed to make decisions from their experience, which meant they were able to see the problems described on the computer screen. The other half were in the experience group, they only saw two buttons on the computer screen and were told that each button was associated with a payoff distribution.
Hertwig et al. found that more participants in the description group chose the option with the higher expected value (H) compared with the experience group.
Thursday, 10 December 2009
Thursday, 3 December 2009
Week 8: Review Session
What a frantic week!
This week our group coursework was due in, so final additions were being made to our page frantically. It was easier to edit and put all of our notes together for this page this Friday because we were all together in one room. Which made writing the page easier, as we could shout across to each other what we plan to do to the page, and what needed writing.
Doing the page separately at home, was not very easy as no-one knew what we should do, or could do, as we were all undecided until we met up to work as a group.
In the lesson, David breifly went over all of the topics we covered, reminding us of what we have learnt so far. It was a very quick lesson. But useful, for revision, as I forgot about some of the topics we discussed at the start of the module.
The weeks have flown by so fast, it is almost the end of the module, already!
Over the coming next few weeks we will be working as a group on our next assignment.
Our topic is; Decisions from experience. It sounds like an interesting enough topic.
We will see how it goes!
This week our group coursework was due in, so final additions were being made to our page frantically. It was easier to edit and put all of our notes together for this page this Friday because we were all together in one room. Which made writing the page easier, as we could shout across to each other what we plan to do to the page, and what needed writing.
Doing the page separately at home, was not very easy as no-one knew what we should do, or could do, as we were all undecided until we met up to work as a group.
In the lesson, David breifly went over all of the topics we covered, reminding us of what we have learnt so far. It was a very quick lesson. But useful, for revision, as I forgot about some of the topics we discussed at the start of the module.
The weeks have flown by so fast, it is almost the end of the module, already!
Over the coming next few weeks we will be working as a group on our next assignment.
Our topic is; Decisions from experience. It sounds like an interesting enough topic.
We will see how it goes!
Thursday, 26 November 2009
Week 7
This week we didn't have a lecture, and I was ill.
Although we corresponded by email about our first group coursework.
This week consisted of reading all of the papers given to us on the topic Judgement and Decisions: the Fast and Frugal way.
The three papers we looked at were:
Dhami, M.K. (2003). Psychological models of professional decision making. Psychological Science, 14 (2), p.174-180.
Dhami, M.K., & Ayton, P. (2001). Bailing and Jailing The Fast and Frugal Way. Journal of Behavioral Decision Making, 14, p.141-168.
Gigerenzer, G. & Goldstein, D.G. (1996). Reasoning the Fast and Frugal Way: Models of Bounded Rationality. Psychological Review, 103 (4). p.650-669.
We found this topic the most interesting so far in the first few weeks of this module, and thought it was a good idea to choose it for our first group coursework.
It will be interesting to see how the essay turns out with all of our different writing style combined into one. It may not flow very well as a whole.
Although we corresponded by email about our first group coursework.
This week consisted of reading all of the papers given to us on the topic Judgement and Decisions: the Fast and Frugal way.
The three papers we looked at were:
Dhami, M.K. (2003). Psychological models of professional decision making. Psychological Science, 14 (2), p.174-180.
Dhami, M.K., & Ayton, P. (2001). Bailing and Jailing The Fast and Frugal Way. Journal of Behavioral Decision Making, 14, p.141-168.
Gigerenzer, G. & Goldstein, D.G. (1996). Reasoning the Fast and Frugal Way: Models of Bounded Rationality. Psychological Review, 103 (4). p.650-669.
We found this topic the most interesting so far in the first few weeks of this module, and thought it was a good idea to choose it for our first group coursework.
It will be interesting to see how the essay turns out with all of our different writing style combined into one. It may not flow very well as a whole.
Week 6: Preference and choice
This week our group had to look at 'The experimental tests of the endowment effect and the coase theorem by Kahneman, Knetsch & Thaler (1990).
This study had a lot of studies to look at and test the endowment effect.
In simple terms, the endowment effect is, for example; when people overprice items that they are trying to sell.
Kahneman found that in most of the studies the endowment effect persisted. No matter what the item was and how long they had owned it for, they still put a higher value on the item, than buyers thought it was worth.
I found this paper quite hard to get to grips with, as it had a lot to do with economics, and a lot of studies!
However, listening to the other groups do the presentation on this paper was helpful, as I understood a lot more from listening to them explain the paper and some of the studies.
I am now understanding why having groups presnting might be useful to us, as it is an extra way of learning and understanding the papers we are having to read, because if we were to just go off and read the papers without hearing feedback form others on what they got from the paper, we might be stuck with only the information we received from reading the paper, which can be limited if the paper was not fully understood.
This study had a lot of studies to look at and test the endowment effect.
In simple terms, the endowment effect is, for example; when people overprice items that they are trying to sell.
Kahneman found that in most of the studies the endowment effect persisted. No matter what the item was and how long they had owned it for, they still put a higher value on the item, than buyers thought it was worth.
I found this paper quite hard to get to grips with, as it had a lot to do with economics, and a lot of studies!
However, listening to the other groups do the presentation on this paper was helpful, as I understood a lot more from listening to them explain the paper and some of the studies.
I am now understanding why having groups presnting might be useful to us, as it is an extra way of learning and understanding the papers we are having to read, because if we were to just go off and read the papers without hearing feedback form others on what they got from the paper, we might be stuck with only the information we received from reading the paper, which can be limited if the paper was not fully understood.
Week 5: Decision framing
This week our group had to read the paper 'What lies beneath: reframing framing effects' by Maule & Villejoubert (2007).
It is a review on previous research on decision framing. They looked at various studies on framing.
Decision framing is the internal representations of a problem, which determine the choice which is then made.
One of the studies mentioned was the Asian disease study by Tversky & Kahneman (1981). It looks at how people have a tendency to choose risk aversion when a problem is positively framed, and are risk seeking when presented with a negatively framed problem.
This corresponds to the framing effect reversal, where the preference/decision made is to do with how the problem is presented. This framing effect suggests choice behaviour may be affected by the way information is presented rather than reflecting the fundamental beliefs and values of the decision maker.
The paper looked at framing in health decision making, and in political decision making. They mention emphasis framing, where relevant information is emphasised and becomes the focus for evaluation and choice, for example economic issues raised in election campaigns, and how this can sway the preferences of the public to or away from a certain political party.
Maule et al. (2007) came up with a model called the information processing model. It tries to highlight that the framing effect involves how the decision problem has been formulated by the experimenter and how a decision-maker internally represents the problem (Kahneman, 2000). The model is a flow diagram of how the decision is made; so it starts with a problem formation which is the input of information, then mental processing happens whilst editing operations happen, internal representation and evalutaion operations in this order, and then out comes a choice behaviour as a result.
It is difficult to know how much the framing effect can influence an individual, as each individual will have different internal representations and beliefs and values that may counteract the framing effect. Also the individual can't clearly illustrate what their internal representations are and how they came to a decision.
It is a review on previous research on decision framing. They looked at various studies on framing.
Decision framing is the internal representations of a problem, which determine the choice which is then made.
One of the studies mentioned was the Asian disease study by Tversky & Kahneman (1981). It looks at how people have a tendency to choose risk aversion when a problem is positively framed, and are risk seeking when presented with a negatively framed problem.
This corresponds to the framing effect reversal, where the preference/decision made is to do with how the problem is presented. This framing effect suggests choice behaviour may be affected by the way information is presented rather than reflecting the fundamental beliefs and values of the decision maker.
The paper looked at framing in health decision making, and in political decision making. They mention emphasis framing, where relevant information is emphasised and becomes the focus for evaluation and choice, for example economic issues raised in election campaigns, and how this can sway the preferences of the public to or away from a certain political party.
Maule et al. (2007) came up with a model called the information processing model. It tries to highlight that the framing effect involves how the decision problem has been formulated by the experimenter and how a decision-maker internally represents the problem (Kahneman, 2000). The model is a flow diagram of how the decision is made; so it starts with a problem formation which is the input of information, then mental processing happens whilst editing operations happen, internal representation and evalutaion operations in this order, and then out comes a choice behaviour as a result.
It is difficult to know how much the framing effect can influence an individual, as each individual will have different internal representations and beliefs and values that may counteract the framing effect. Also the individual can't clearly illustrate what their internal representations are and how they came to a decision.
Week 4: Decision making under risk and uncertainty
In the lecture this week we looked at the Utility theory, which is to do with the amount of wealth one has and the amount of risk willing to take to attain more wealth.
We discussed the three failures of the utility theory:
1. Risk-seeking versus risk-averse behaiour. Kahneman and Tversky (1992) researched risk attitudes, with regards to whether the outcomes are gains or losses, and whether probabilities are small or medium-to-large. they presented several problems for people to choose from, one half of the options are more risky, where as the other is risk averse; a sure loss. They show that the assumption that people are more liekly to undertake risk aversion behaiour is not supported, because they found that more people chose the risky options, making them more risk-seeking.
2. People do not maximise expected utility. People do not always choose decision options that will maximise expected utility. Allais (1953, 1990) created situations with different outcomes for people to choose from to assess behaviour. He found that people chose the option that does not maximise expected utility because they switch from certainty to uncertainty in their choices for different problems, depending on the amount of risk there is in a problem, they chose the situation with less risk for the first oroblem, and chose the more risky situation in the second problem, so aren't consistent in their choices.
3. People do not integrate prospects with existing assets. Kahneman and Tversky looked at two problems which had two situations to chose from in each. When presented with the problems the participants did not integrate the two, so did not put their assets together and look at it as a whole. This means they are likely to not maximise their utiliy.
We discussed the three failures of the utility theory:
1. Risk-seeking versus risk-averse behaiour. Kahneman and Tversky (1992) researched risk attitudes, with regards to whether the outcomes are gains or losses, and whether probabilities are small or medium-to-large. they presented several problems for people to choose from, one half of the options are more risky, where as the other is risk averse; a sure loss. They show that the assumption that people are more liekly to undertake risk aversion behaiour is not supported, because they found that more people chose the risky options, making them more risk-seeking.
2. People do not maximise expected utility. People do not always choose decision options that will maximise expected utility. Allais (1953, 1990) created situations with different outcomes for people to choose from to assess behaviour. He found that people chose the option that does not maximise expected utility because they switch from certainty to uncertainty in their choices for different problems, depending on the amount of risk there is in a problem, they chose the situation with less risk for the first oroblem, and chose the more risky situation in the second problem, so aren't consistent in their choices.
3. People do not integrate prospects with existing assets. Kahneman and Tversky looked at two problems which had two situations to chose from in each. When presented with the problems the participants did not integrate the two, so did not put their assets together and look at it as a whole. This means they are likely to not maximise their utiliy.
Thursday, 29 October 2009
Week 3
This week we had to do a presentation on the paper 'Bailing and Jailing the Fast and Frugal Way' by M. K. Dhami & P. Ayton (2001). The paper looked at some of the methods magistrates and judges can use for decision making and how effective they are. Dhami and Ayton focused on the fast and frugal model, and compared it to other models. The fast and frugal model method uses one cue for decision making. The fast and frugal model was found to be better at predicting simulated judgements on cases compared to other models such as the compensatory integration models.
Although it has been found to be an effective decision making method, it would be frowned upon if people knew that migistrates were judging people based on one piece of information, and not considering the other pieces of information available. The main cues/factors that magistrates can base a judegment on are; race; gender; and age. Even though magitrates say they are using all of the information provided to make their decision, most of the time those three cues are used to make their decisions, so are using the fast and frugal modal in some way, because those three cues carry a lot of weight in magistrates' decision making.
Although it has been found to be an effective decision making method, it would be frowned upon if people knew that migistrates were judging people based on one piece of information, and not considering the other pieces of information available. The main cues/factors that magistrates can base a judegment on are; race; gender; and age. Even though magitrates say they are using all of the information provided to make their decision, most of the time those three cues are used to make their decisions, so are using the fast and frugal modal in some way, because those three cues carry a lot of weight in magistrates' decision making.
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