100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Lecture notes Human Decision Making (UEC31306) $5.47
Add to cart

Class notes

Lecture notes Human Decision Making (UEC31306)

 11 views  3 purchases
  • Course
  • Institution

Samenvatting lecture notes Human Decision Making (UEC31306) Wageningen University

Preview 3 out of 23  pages

  • March 8, 2023
  • 23
  • 2021/2022
  • Class notes
  • Jannette van beek
  • All classes
avatar-seller
Human decision making:

Economics and pshycology, is like water and fire. They do look at a different angel to human decision
making and behavior.
Economics: Psychology:
- Assumptions about human behavior (they - Research about behavior ( they
have assumptions and mathematical models. do measure how people behave)
- Aggregated behavior - Individual behavior
- Normative theory (how an rational person - Descriptive theory
make decisions. - Separate theories (occasional
- Deviations (anomalies) from theory theories for deviations)

Assumptions of economic theory;
- Complete information about choice alternative (market transparency)  this is frequently
not the case. It is impossible to know everything. People are also too lazy to know all the
information. People make decisions based on less than every information
- Correct calculation of utility of combinations
- Individualism, self-interest, people make a decision what is important for them. But this is
not true, we think a lot about fairness.
- Knowledge about short-term and long-term utility. If you want to make a rational decision
about eating chips, you have to think about the long-term. That doesn’t happen.
- Stable preferences  doesn’t happen, your taste is changing all the time.
- Maximization or optimization of utility.
- No role for emotion

Human are represented as a rational economic man. Which is not realistic
Rational economic man:
- Unlimited information processing
- Maximization of own outcomes (greed)
- Incredible willpower
 This is problematic

Some answers of economists:
- Maybe people are not rational, but they do act rationally, even if you don’t consider all the
options / make all the calculations / have all the information
- Irrational agents will become extinct ( not true !!)
- Aggregate behavior is more rational (little bit true, large groups are better than individuals.
But if everyone is making the wrong decision, than the aggregate behavior is not true) people
make systematic errors.
- It will even out in the long run (not true, systematic deviations)
- If it’s about big money, people become more rational (not true) at some point it is true,
people do think more rational, but there are still a lot of systematic errors/biases.

Rationality:
- Maximizing outcomes: choose the alternative with the highest expected value/utility
- Assumes knowledge and skills:
 All options are known
 Circumstances are known for all options, or the probabilities of these circumstances

,  Consequences of all options are known
 Values of consequences are known
 A calculation can be accurately made, and the highest expected value or utility can
be calculated.

Decision making
Decisions are really important:
- Since resources are limited
- To adjust to one’s environment
- Decisions have a large influence on both an individual’s happiness and society

What is a decision?
- A decision is defined as a moment in an ongoing process of evaluating alternatives for
meeting an objective, at which expectations about a particular course of action impel the
decision maker to select that course of action most likely to result in attaining the objective.
- One moment in a larger process
- When alternatives are evaluated
- Leading to the selection of one alternative
- Aimed at a specific goal
1. Gathering information:
- Problem definition (current situation-goal)
- Criteria; weight of criteria
- Creating alternative options
- Assessing (possible) consequences of alternatives
2. Evaluation
- Judging the options
- Designing/calculating outcomes
3. Action
- Deciding/choosing
4. Implementation
- Executing the decision
5. Evaluation of decision outcome
- This helps you to make your next decision
Examples:
- Ordering a meal in a restaurant
- Starting a consultancy firm
- Not quitting smoking
Important distinctions:
- What is the difference between judgement and decision-making?
- What is the difference between problem-solving and decision-making?
- What is the difference between a decision and decision-making?

Judgement vs decision making:
- Judgement is the cognitive part of decision making  where you are considering the
alternatives.
- Usually before the decision or as a evaluation after decision
- A judgement requires a choice to become a decision. It only becomes a decision when you
pick it.

, Problem solving:
- Problem-solving may or may not require action. There is not always an action, you do not
always have to make a decision.
But large overlap with decision making
 Both can contain multiple decisions
 More focus on analyzing the problem in problem solving
 More focus toward the end of the process in decision-making


Lecture 2
Rationality:
- Maximizing outcomes: choose the alternative with the highest expected value/utility
- Assumes knowledge and skills:
 All options are known
 Circumstances are known for all options, or the probabilities of these circumstances
 Consequences of all options are known
 Value of consequences are known
 A calculation can be accurately made, and the highest expected value or utility can
be calculated.

Bounded rationality:
Decision-makers try to be rational, but:
- They lack important information with regard to the problem, criteria, options, etc.
- Time and cost restrictions create boundaries to making accurate assessments of problem,
options and criteria
- Restrictions in intelligence and perception create boundaries to making accurate calculations
on utility
- People use simplified models

Two processing systems:
Rational / analytic system (2) Emotional / affective system (1)
Analytic Holistic
Logical Intuitive
Deliberative Affective
- Fear, dread, anxiety represents risks as
feelings
Abstract Vivid
- Encodes reality in abstract symbols, - Encodes reality in concrete images and
words & numbers narratives, linked to associative
- Rules and algorithms need to be learned networks
- System needs to be cued; does not - Operates automatically and without any
operate automatically training

There is never a decision where you do only use the analytic system. Indeed there are decisions
where you only use the emotional system.




System 1 & 2

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller anneklaassen2. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $5.47. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

53920 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
$5.47  3x  sold
  • (0)
Add to cart
Added