Week 9
This week we didn’t have any class but we have drop in session, if we needed to see David regarding our presentation on week 11. As a group we are assigned to present this article: Cokely, E.T., & Kelley, C.M. (2009). Cognitive abilities and superior decision making under risk: A protocol analysis and process model evaluation. Judgment and Decision Making, 4 (1), 20-33. My group came in that Friday to have a quick chat with David about the presentation. Afterwards we had a small meeting, that we discussed about the presentation and we also decided what everyone is doing.
Am little anxious about the presentation, because I really get nervous standing in front of people, but hopefully it will go good.
Wednesday 16 December 2009
Week 7 & 8
On week 7 we did not have any formal class as David were attending a conference in Boston, but our midterm coursework was due in that Friday however it was changed to the following week because many students found it both difficult and confusing. The main confusion was due to the way we were handing in our coursework, I think because it was different from the normal way we are used to handing in coursework. So during the week we were working on our coursework.
On week 8, we had review session, going through all the topic we have done previous weeks. We got the chance to discuss different topics among the students, and ask David if any clarification needed.
On week 8, we had review session, going through all the topic we have done previous weeks. We got the chance to discuss different topics among the students, and ask David if any clarification needed.
Week 6
Week 6
This week we were told to read the article: “Neoclassical theory versus prospect theory: Evidence from the market” by John A, List. This article examined endowment effect on consumer in Market place, by testing neoclassical theory against prospect theory. Previous studies has shown that preferences are not independent of current entitlements and a study conducted by Knetsch (1989) showed that participants were more likely to keep their endowed goods (L, A., John 2004). However the evidence done so fare favor prospect theory but some economist has argued that endowment effect is due to mistake made by inexperienced consumers and through time and experiences they are more likely to match predictions from neoclassical model. Recent experiments done on endowment effect supported this theory, for instance List (2003) study examined trading rates of sport memorabilia in an actual marketplace, and observed low number of trades made by inexperienced which consisted with prospect theory, but individual behavior approaches neoclassical expectations as market experience intensifies (List 2004). This findings suggest that behavior does change among inexperience and experience traders, but however some important questions rise from this studies because List 2003 was not mainly interested in testing the major theories. His study did not properly distinguished between prospect theory and neoclassical theory because experienced agents may have planned on reselling the good. This is a important factor as Kahneman, Knetsch and Thaler (1990) stated that there are some cases in which no endowment effect would be expected when goods are bought for resale purposes rather then for utilization. This study took into account all issues by conducting experiment within a well-functioning marketplace. The advantages of conducting this experiment in natural occurring environment is that people will still engage in market activities such as buying and selling regardless of the experiment. This study used more familiar goods such as chocolate bars and mugs. This study found overall strong support for prospect theory within inexperienced consumers, and for those consumers that had a considerable amount of exchange opportunity in the marketplace, neoclassical theory predicts reasonably well, evidence that behavior approaches the neoclassical prediction for experienced agents (List 2004).
This week we were told to read the article: “Neoclassical theory versus prospect theory: Evidence from the market” by John A, List. This article examined endowment effect on consumer in Market place, by testing neoclassical theory against prospect theory. Previous studies has shown that preferences are not independent of current entitlements and a study conducted by Knetsch (1989) showed that participants were more likely to keep their endowed goods (L, A., John 2004). However the evidence done so fare favor prospect theory but some economist has argued that endowment effect is due to mistake made by inexperienced consumers and through time and experiences they are more likely to match predictions from neoclassical model. Recent experiments done on endowment effect supported this theory, for instance List (2003) study examined trading rates of sport memorabilia in an actual marketplace, and observed low number of trades made by inexperienced which consisted with prospect theory, but individual behavior approaches neoclassical expectations as market experience intensifies (List 2004). This findings suggest that behavior does change among inexperience and experience traders, but however some important questions rise from this studies because List 2003 was not mainly interested in testing the major theories. His study did not properly distinguished between prospect theory and neoclassical theory because experienced agents may have planned on reselling the good. This is a important factor as Kahneman, Knetsch and Thaler (1990) stated that there are some cases in which no endowment effect would be expected when goods are bought for resale purposes rather then for utilization. This study took into account all issues by conducting experiment within a well-functioning marketplace. The advantages of conducting this experiment in natural occurring environment is that people will still engage in market activities such as buying and selling regardless of the experiment. This study used more familiar goods such as chocolate bars and mugs. This study found overall strong support for prospect theory within inexperienced consumers, and for those consumers that had a considerable amount of exchange opportunity in the marketplace, neoclassical theory predicts reasonably well, evidence that behavior approaches the neoclassical prediction for experienced agents (List 2004).
Saturday 12 December 2009
Week 5
Week 5
This week we were told to read: “Deep thoughts and Shallow Frames: On the Susceptibility to framing Effects” This article were very interesting to read as it pointed out very important topic not only in psychology but in everyday life. Framing effect is one of the cognitive biases which presents the same option but in different formats which then could affect people’s decisions. Manipulating decision frames has been found to affect choices in medicine, voting, public goods allocation, gambling and consumer judgment.
Tversky & Kahneman, 1981 said that framing effects occur whenever alternative descriptions of what is essentially the same decision problem give rise to predictably different choices. Sieck & Yates 1997, Smith 1985 argued that framing effect occurs whenever people make a decision without giving much of attention, and framing effect would occur less if people thought more carefully about their choices. A classic example is the Asian Disease with both negative and positive frames. Within positive frames there is two alternative and the sure options is preferred rather then risky option. Because the sure option will save 200 people, whereas the second option gives a one-third probability of saving everyone and two-third of 600 people dying. Due to framing effect the first option sounds better whereas in reality this two option are the same but they are framed in different ways. Within the negative frames people choose the risky option because the sure option 400 people will die. These two different scenario reflect the prospect theory were decision makers become risk seeking when faced with loss and risk averse when the sure option is perceived as gain. However this clash with the rational theory whereby the fundamental tenets is that decision remain invariant across logically equivalent methods of elicitation and across logically equivalent descriptions of the options (Tversky & Kahneman 1986). Some studies has shown that framing effect reduce when participants asked to justify their choices but only after spending 50 minutes to make a decision (Sieck & Yates 1997). Nevertheless other studies on framing effect has shown that framing effect do still occur even if they justify their choices, such as study conducted by Faglet and Miller (1987) and Levin and Chapman (1990). Although the fact that the evidence based on framing effect is mixed and very limited, many researchers tend to support the fact that more thoughts given to a problem reduces the likelihood of framing effect. In this paper study 1 was carried out in Princeton University with three hundred and sixty-five undergraduate students to investigates framing effect. They investigated different framing problems by measuring ‘Need for Cognition’ and justification, but did not report any framing effect reduction. In study 2 two hundred and ninety-two students from Princeton University participated and this time only two framing problems was used. The findings on this study predict important result as those higher in NC were more likely to make choices consistent with their earlier responses than those with lower in NC.
However it demonstrated that overall the initial influence of framing effect is not avoided, but people in high NC are more likely to notice the potential for violating the principle of invariance. This paper was very interesting to read and very beneficial overall, and I have seen in different cases where by I choose different option based on the way its framed, but then I did not know about the framing effect at least I know now.
This week we were told to read: “Deep thoughts and Shallow Frames: On the Susceptibility to framing Effects” This article were very interesting to read as it pointed out very important topic not only in psychology but in everyday life. Framing effect is one of the cognitive biases which presents the same option but in different formats which then could affect people’s decisions. Manipulating decision frames has been found to affect choices in medicine, voting, public goods allocation, gambling and consumer judgment.
Tversky & Kahneman, 1981 said that framing effects occur whenever alternative descriptions of what is essentially the same decision problem give rise to predictably different choices. Sieck & Yates 1997, Smith 1985 argued that framing effect occurs whenever people make a decision without giving much of attention, and framing effect would occur less if people thought more carefully about their choices. A classic example is the Asian Disease with both negative and positive frames. Within positive frames there is two alternative and the sure options is preferred rather then risky option. Because the sure option will save 200 people, whereas the second option gives a one-third probability of saving everyone and two-third of 600 people dying. Due to framing effect the first option sounds better whereas in reality this two option are the same but they are framed in different ways. Within the negative frames people choose the risky option because the sure option 400 people will die. These two different scenario reflect the prospect theory were decision makers become risk seeking when faced with loss and risk averse when the sure option is perceived as gain. However this clash with the rational theory whereby the fundamental tenets is that decision remain invariant across logically equivalent methods of elicitation and across logically equivalent descriptions of the options (Tversky & Kahneman 1986). Some studies has shown that framing effect reduce when participants asked to justify their choices but only after spending 50 minutes to make a decision (Sieck & Yates 1997). Nevertheless other studies on framing effect has shown that framing effect do still occur even if they justify their choices, such as study conducted by Faglet and Miller (1987) and Levin and Chapman (1990). Although the fact that the evidence based on framing effect is mixed and very limited, many researchers tend to support the fact that more thoughts given to a problem reduces the likelihood of framing effect. In this paper study 1 was carried out in Princeton University with three hundred and sixty-five undergraduate students to investigates framing effect. They investigated different framing problems by measuring ‘Need for Cognition’ and justification, but did not report any framing effect reduction. In study 2 two hundred and ninety-two students from Princeton University participated and this time only two framing problems was used. The findings on this study predict important result as those higher in NC were more likely to make choices consistent with their earlier responses than those with lower in NC.
However it demonstrated that overall the initial influence of framing effect is not avoided, but people in high NC are more likely to notice the potential for violating the principle of invariance. This paper was very interesting to read and very beneficial overall, and I have seen in different cases where by I choose different option based on the way its framed, but then I did not know about the framing effect at least I know now.
Saturday 21 November 2009
Week 4
Week four was about decision making under risk and uncertainty, as a group we were told to read the: The priority heuristic: making choice without trade-offs. To understand this article I read chapter 7 in Davids book and it simplified the subject. The start of the lecture David went to explain generally what decision making is all about and how people tend to make decision under risk and uncertainty. He also gave us some examples in gambling, how people tend to be more risk aversion when faced with options that has sure amount of money, but again in second alternative people becomes more risk seeking when presented with less money for certain. Then we further went into expected utility theory which means that we consider our wealth whenever we are making any decisions. The article we read were testing how accurately the heuristic predicts people’s choices, compared to previously proposed heuristics. According to Branstatter, E., and Gigerenzer, G., (2006), the reason for choosing are often negatively correlated with one another, high returns go with low probabilities, and low returns go with high probabilities, and Shanteau & Thomas, 2000 suggest that negative correlations between reasons cause people to experience conflict, leading them to make trade-offs. The topic of this week were very interesting as we face decision making during our daily life, and the decision we make is informed by our judgment. We were told to do an exercise to measure our utility. This two graphs show certainty and probability equivalence.
In my two graphs it shows that am risk averse when it comes to high amount of money, but again am risk seeking if the money i have is small and the winning price is higher. Which I think is common behavior among people generally, however it might differ for gamblers.
In my two graphs it shows that am risk averse when it comes to high amount of money, but again am risk seeking if the money i have is small and the winning price is higher. Which I think is common behavior among people generally, however it might differ for gamblers.
Saturday 7 November 2009
Week 3
Third week I missed the lecture due to personal issues, but my group made a presentation on the Reasoning the fast and frugal way: Models of bounded rationality article which was very difficult to understand in first reading but after several time it fall into place ( at least i hope so). The article went into details about how people make decision under time limit, and how an organism make logical judgment about unknown aspects of the environment. It provides different directions based on classical view that the laws of human are the law of probability and statistic. The Enlightenment view about probability theory and human reasoning remained strong within psychology and economist, but however recently heuristics and biases program stated that human inference is systematically biased and error prone, which leads to that the laws of inferences are quick and perhaps not good, but do not state the same about the laws of probability. This two different view agree that the laws of probability and statistics as normative but the argument is if human can stand up to these norms. Many experiments has been conducted based on this two different views, and trying to understand if the human mind appears more rational or irrational, and based on the experiments that been conducted the outcome would not simply fit in to the real world situation. A third theory came out focusing at the psychological and ecological aspect of inference, this view is looking at classical rationality as a universal norm, also questions the definition that the Enlightenment and the heuristic and bias were built upon. Simon 1956 came up with the model bounded rationality instead of classical rationality. He argues that information processing systems typically need to satisfice rather then optimize which means that an organism would choose the first satisfying object rather then taking time to rule out all the possibilities. The bounded rationality has two sides one cognitive and one ecological, and he emphasized that the minds are adapted to real world environments. However Simon view did not had a great impact in research on human inference, because they were often discredited. This paper will look into this field, the researchers looked at how these simple intelligent algorithms capable of making near optimal inferences by using simple psychological principles that satisfy the constraint of limited time, knowledge rather then those of classical rationality. They were designed to be fast and frugal without a significant loss of inferential. The task were involved question like, Which City has larger population? a) hamburg b) cologne, this kind of question requires knowledge and it has to be done in time limit. This paper really go in to deep about reasoning, and the most important result is that simple psychological mechanisms can have many correct inference in less time than standard statistical linear models that embody classical properties of rational inference. This paper illustrate that fast and frugal defeats the view that only rational algorithms can be accurate. It stated that the mind can have both ways.
I have to say I have written bit to much about this paper, mainly because I missed the lecture and now I got the chance to evaluate and make an understanding about it. I would probably say that it would been fairly easier to do it as a group, at least then you will have different views and you can discuss it as a group.
I have to say I have written bit to much about this paper, mainly because I missed the lecture and now I got the chance to evaluate and make an understanding about it. I would probably say that it would been fairly easier to do it as a group, at least then you will have different views and you can discuss it as a group.
Week 1
First week was introduction to Judgment and decision making, we were told how the lecture will be assessed, and we were divided in groups up to six people or less. David also told us that we were expected to do a blogger and write a reflective on each week, and furthermore to do a class presentation ever week as a group on chosen article. Personally I think this will be every useful as we will get more in depth knowledge about this topic, and we will get a chance to enhance our presentation skills. In second year in cognitive psychology lecture the judgment and decision making was very interesting but bit difficult, I think this module will simplify and enhance my knowledge. I ended up in a group of six people, and we were told to read the Fast and Frugal article for next lecture which will take place the third week, due to cancellation on second week lecture.
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