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DECISION MAKING
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Lecture notes of 4 pages for the course neuropsychology at UNN (LECUTRE 4 OUT OF 6)
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Lecture 4 – decision makingWe make decisions all the time;
- E.g., Yik Yak App which allows students to communicate anonymously abut a lecture
- Controversial because not all comments are good ones, so should this be allowed?
- Another example is buying video game insurance, seems reasonable at the time.
Odds are stacked against you because they ask you as you are paying a lot of money
for the game. It is linked to time because you don’t have lots of time to think about
this decision and so more likely to say yes then when you have had time to research
it.
Decision making e.g., online dating;
- People do not understand probability, would be worth spending money on it if you
then find a millionaire to marry.
- Emotion typically guides our decisions, often without our awareness
- Decision-making looks at how we handle risk (i.e., decisions that are inherently
probabilistic and emotional)
Kahneman (2012) ;
- simplifies the mind to two systems
- System 1 (FAST) = Automatic, effortless, emotional, prone to heuristics and errors
- System 2 (SLOW) = Rational, thoughtful, deliberate, accurate and conscious
Kahneman 2011;
- Bounded rationality = decision making is limited by available information, our
capacity to handle it, and the time we have for deciding (Simon, 1972)
What influences our decisions?
- Easily available information
- Current emotional state
- How a question is asked
- Fear of losses
- Heuristics and fallacies
See also;
- The Signal and the Noise (Nate Silver) E.g., for a poker player system 2 is well
developed and accurate, system 1 will still occur and shows the emotional pain of
losing a hand when they had a high probability to win.
- Nudge (Richard Thaler & Cass Sunstein)/Rationality (Pinker, 2021)
Example of decision making;
- Should I buy life insurance?
- Half of males my age will be dead in fifty years
- A £100,000 policy will cost £70 per month and expires after 30 years
- ~20% of remaining members of my cohort will be dead in 30 years
- A missed payment invalidates the policy
Should I buy insurance?
- This is an emotional topic, For the insurance company, this is a maths problem,
solvable with statistics and regression
- Most decisions are probabilistic & emotional
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