Deductive Reasoning & Decision Making Dr. Claudia J. Stanny EXP 4507 Memory & Cognition Spring 2009

Overview Deductive reasoning and biases in reasoning Decision making heuristics Heuristics versus normative strategies for making decisions Claudia J. Stanny2

Steps in Making a Decision Establish goals Gather information Structure the decision Make a final choice Evaluate the decision & the process used

Probability Methods for quantifying uncertainty surrounding decision outcomes Probabilistic decisions can be represented as gambles with varying wins and payoffs People have Difficulty correctly appreciating the meaning of probabilistic statements What is the difference between being 60% sure and 75% sure? People interpret words such as seldom, likely, and frequent differently.

Cognitive Illusions: Heuristics & Biases in Decision Making Availability Representativeness Framing Effects Anchoring Sunk Cost Illusory Correlation Hindsight Bias Confirmation Bias Overconfidence

Why do we use heuristics if they cause errors? Gigerenzer et al. (199) Simple Heuristics that Make Us Smart Heuristics are fast and frugal methods for arriving at decisions that are “good enough” most of the time Laboratory tasks demonstrate the special circumstances when heuristics backfire and produce an error Claudia J. Stanny6

Seven Sins of Memory (Schacter, 1999) Memory failures are by-products of otherwise adaptive features of the memory system Transience of memories Absent-Mindedness (inattention) Blocking (temporary inaccesibility) Misattribution (source confusions) Suggestibility Bias (distortions related to expectations and prior knowledge) Persistence (remembering when we would like to forget) Claudia J. Stanny7 Schacter, D. L. (1999). The seven sins of memory. American Psychologist, 54,

Availability All accidents Asthma Diabetes Motor vehicle accidents Falling airplane parts Appendicitis Drowning Strokes Electrocution Homicide Cancer of the digestive system Shark attack Lightning Leukemia For each of the following pairs, which event is the more frequent cause of death for all people in the United States?

Fast and Frugal Heuristics Availability works well as a heuristic when ease of retrieval is directly related to frequency of an event Availability produces errors in judgment when additional factors make some items or events easier to retrieve: Events with strong emotion (dread events) Some events receive more media publicity or attention Events that are more distinctive in memory Claudia J. Stanny9

Representativeness Heuristic Which of the following sequences of letters was most like to have been created by a random process (such as flipping a coin)? XOXXXOOOOOXXOOOXXXXOX XOXOXOOOXXOXOXOOXXXOX

Framing Effects Imagine that you are on vacation. When planning your vacation, you budgeted $200 for tickets to a concert. After paying $100 for concert tickets, you arrive at the theater and discover that the tickets have been lost. Do you buy new tickets? When you arrive at the box office to buy tickets (costing $100), you discover that you somehow lost $100 from your wallet. Do you buy the tickets anyway?

Framing Effects Imagine that you were given $1000 and asked to choose between the following alternatives. Which alternative would you choose? 50% chance of gaining $1000 Sure gain of $500 Imagine that you were given $2000 and asked to choose between the following alternatives. Which alternative would you choose? 50% chance of losing $1000 Sure loss of $500

Anchoring & Adjustment If all of the human blood in the world were poured into a cube-shaped tank, how wide would the tank be?

Which set of letters (A or B) will allow us to draw the largest number of different paths? X X X X A X B

As the president of an airline company, you have invested $10 million of the company’s money in a research project. The purpose of the research project was to build a plane that would not be detected by conventional radar. When the project is 90% completed, another firm begins marketing a plane that cannot be detected by radar. In addition, it is apparent that their plane is much faster and more economical to operate than the plane your company has been developing. Should you invest the last 10% of the research funds (an additional $1 million) to complete the development of your radar-invisible plane? The company has already invested $10 million, the project should be completed. It makes no sense to continue spending money on the project.

Evaluating Correlations Suppose a study of 250 neurological patients produces the following observations of the frequencies of dizziness and brain tumors. Which cells of the table are needed in order to determine whether dizziness is associated with brain tumors in this sample of patients? (circle all that apply) Illusory Correlations

Hindsight Bias Tendency to perceive decisions and other outcomes as inevitable Knew it all along phenomenon Psychological research is often regarded as “common sense” and research findings are believed to be predicable once the findings are known

Confirmation Bias Tendency to seek information that is consistent with our hypothesis or beliefs Contradictory information is ignored or discounted Note the role of confirmation bias in the selective attention to cells in the dizziness & tumors data

Choose one answer for each of the following questions. For each answer, rate your confidence that your answer is correct on a scale from 50% (just guessing) to 100% (certain that you are correct). Which magazine had the largest circulation in 1978? TimeReader’s Digest Who was the 21 st president of the United States? Chester ArthurGrover Cleveland Which city had the larger population in 2002? Montreal, QuebecToronto, Ontario Who began the profession of nursing? Florence NightingaleClara Barton

Overconfidence Problems in the calibration of confidence Participants express greater confidence in the accuracy of their responses than justified Actual Performance Performance if Confidence Ratings Were Accurate

Improving Decision Making Overconfidence lead to the following problems Do not question quality of decisions made Do not seek better decision-making strategies Provide feedback on performance to improve the calibration of confidence and reduce overconfidence Structure the decision-making environment Force the consideration of alternative options Require an analysis of expected value of outcomes Change culture that prefers decisions made by humans to one that prefers data/statistically-based decisions