Eman Test 2
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The process that prevents us from noticing useful, readily observable data that would be relevant to our decisions
Why does bounded awareness occur?
To cope with information overload
Not seeing something because you aren't looking for it
Ex. Invisible gorilla
Failing to notice a significant change; can be because change happens gradually
Ex. Boiling frog
The exaggerated importance of a subset of relevant information and neglect of other available information
Ex. Challenger disaster
Inappropriate attention occurs when an alternative is offered that is obviously not the right one
Ex. Weekend in Paris, Rome, or Rome without free coffee
Bounded awareness in groups
Groups tend to discuss and emphasize shared information and tend to ignore or deemphasize unshared information
Monty Hall game
Three doors, one proven to be empty, switch from original choice or stay (should switch)
Demonstrates how naive misconceptions of probability lead to irrational choices
Other bounded awareness phenomena
- Misperception of impact of deadlines on negotiations
- System neglect
- Impact of third parties
Tendency to overpay because of failure to accurately consider perspectives of other parties
Alternative wordings of the same information that significantly alter decisions despite no objective difference in the actual information
Ex. At risk students for dropping out
What do we pick in a gain frame?
What do we pick in a loss frame?
- Gain frame: certain option
- Loss frame: risk-seeking mode
Group decisions considered together vs. isolated, sequential decisions
Reflect different preference patterns; isolated decisions tend to promote inconsistent preference patterns compared to combination decisions
Providing certainty has a greater influence on our decisions than making the same numerical change in probability with other values
A certain loss that is generally accepted as part of a decision process
The utility to you of whatever product or service you acquire
Ex. New phone vs. old phone
The perceived quality of the deal relative to what you think the item should cost
Ex. Beer at rundown store vs. at a fancy bar
When there is a premium attached to the value of an item only because someone owned it before
Mentally maintaining different categories of expenses or income and we may tend to use different decision rules for different accounts
Ex. Trip to Europe
Multiple smaller losses ___ more than than one larger loss.
Multiple smaller gains ___ more than one larger gain.
- Multiple smaller losses hurt more than than one larger loss.
- Multiple smaller gains are appreciated more than one larger gain.
Harms of omission vs. harms of commission
Tendency to choose to not do anything that would harm a situation
Tendency to act to prevent harm due to commission while tolerating harms due to omission
Status quo bias
Tendency to act to preserve the status quo, because losses associated with changing things tend to be given more weight than the gains from the changes
Regret in long term vs. short term
Actions are regretted more in the short term but omissions are regretted more in the long term
Rebates vs. bonuses
- Rebates cause you to save more
- Bonuses cause you to spend more
Want vs. should
Want option dominates one-at-a-time processes while should option dominates joint evaluations
Evaluation of hard to judge aspects are easier with a reference comparison so the difficult attribute carries less weight in joint evaluations
Where no amount of any "good" ever seems to be permanently satisfactory - we adapt to our increased wealth, take it for granted, and soon desire more
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