Kahneman (2003). A perspective on judgment and choice.
The article presents a current perspective on the three major topics of their joint work: heuristics of judgment, risky choice,
and framing effects. In all three domains they studied intuitions. The first part (Intuition and Accessibility) distinguishes two
modes of cognitive function and describes the factors that determine the accessibility of different judgments and responses.
The second part (Framing Effects) explains framing effects in terms of differential salience and accessibility. The third part
(Changes or States: Prospect Theory) proposes that changes and differences are more accessible than absolute values.
Part 1: Intuition and Accessibility
Intuitions are thoughts and preferences that come to mind quickly and without much reflection. From its earliest days, the
research that they conducted was guided by the idea that intuitive judgments occupy a position. Later came a two-system
view, which distinguished intuition from reasoning. The research focused on errors of intuition.
In particular, the differences between the two modes of thought have been invoked in attempts to organize seemingly
contradictory results in studies of judgment under uncertainty. We can name this systems as System 1 and System 2. System
1 contains typically fast operations, which are automatic, effortless, associative, implicit and often emotionally charged. They
are governed by habit and therefore difficult to control or modify. The operations of System 2 are slower, serial, effortful,
more likely to be consciously monitored and deliberately controlled. They are also relatively flexible and potentially rule
governed. Because the overall capacity for mental effort is limited, effortful processes tend to disrupt each other, whereas
effortless processes neither cause nor suffer much interference when combined with other tasks.
As indicated in Figure 1, the operating characteristics of System 1 are similar to the features of perceptual processes. On the
other hand, the operations of System 1, like those of System 2, are not restricted to the processing of current stimulation.
Intuitive judgments deal with concepts as well as with percepts and can be evoked by language. In the model, the perceptual
system and the intuitive operations of System 1 generate impressions of the attributes of objects of perception and thought.
These impressions are neither voluntary nor verbally explicit. In contrast, judgments are always intentional and explicit when
they are not overtly expressed. Thus, System 2 is involved in all judgments, whether they originate in impressions or in
deliberate reasoning. The label intuitive is applied to judgments that directly reflect impressions—they are not modified by
System 2.
One of the functions of System 2 is to monitor the quality of both mental operations and overt behavior. People who are
occupied by a demanding mental activity (e.g., attempting to hold in mind several digits) are more likely to respond to
another task by blurting out whatever comes to mind. If the operations of System 2 are disrupted, then “System 2 monitors
the activities of System 1”. With the example of the ball and bat: people are not accustomed to thinking hard and are often
content to trust a plausible judgment that quickly comes to mind. Intuition doesn’t have to be associated with poor
performance; intuitive thinking can also be powerful and accurate. Klein (2003) mentions that skilled decision makers often
do better when they trust their intuitions than when they engage in detailed analysis.
The Accessibility Dimension
Under appropriate circumstances, many intuitive thoughts come to mind spontaneously and effortlessly, like percepts. Why
do some thoughts come to mind more easily than others? Accessibility refers to the ease (or effort) with which particular
mental contents come to mind. The accessibility of a thought is determined jointly by the characteristics of the cognitive
mechanisms that produce it and by the characteristics of the stimuli and events that evoke it.
At one end of the accessibility dimension are found operations that have the characteristics of perception and the intuitive
System 1: they are rapid, automatic, and effortless. At the other end are slow, serial, and effortful operations that people
need a special reason to undertake. Accessibility is a continuum, not a dichotomy, and some effortful operations demand
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, more effort than others. The acquisition of skill selectively increases the accessibility of useful responses and of productive
ways to organize information (for example, a master chess player does not see the same board as the novice).
Determinants of Accessibility
What becomes accessible in any particular situation is mainly determined, of course, by the actual properties of
the object of judgment. Physical salience also determines accessibility: If a large green letter and a small blue letter are
shown at the same time, green will come to mind first. However, salience can be overcome by deliberate attention: an
instruction to look for the smaller letter will enhance the accessibility of all its features, including its color.
Accessibility also reflects temporary states of priming and associative activation, as well as enduring operating characteristics
of the perceptual and cognitive systems. Some attributes (natural assessments) are routinely and automatically registered by
the perceptual system or by System 1 without intention or effort. In addition to physical properties as size, distance and
loudness, the list of natural assessments includes more abstract properties as similarity, surprisingness, and mood. The
evaluation of stimuli as good or bad is a particularly important natural assessment. Also, the effect of context is very
important in accessibility. For example, a “B/I3” in a series of letters is seen as a letter, where it is seen as a number in a
series of numbers.
Part 2: Framing Effects
Extensionality or invariance is the assumption that preferences are not affected by variations of irrelevant features of options
or outcomes. Invariance is violated in demonstrations of framing effects. Framing effects are demonstrated in the Asian
Disease Problem: people have to choose for A (200 people will be saved) or B (one-third probability that 600 people will be
saved and two-third probability that no people will be saved). Most people choose for A: indicating risk aversion. But when it
is framed differently: A (400 people will die) or B (one-third probability that nobody dies and two-third probability that 600
people will die), most people choose for B: the risk-seeking option.
Outcomes that are certain are overweighted relative to outcomes of high or intermediate probability. Framing effects are the
discrepancies between choice problems that decision makers, upon reflection consider effectively identical. A framing effect
occurs also when the one choice has a richer description than the other. Framing effects are not restricted to decision
making; it can also happen in problem solving (Tower of Hanoi). The puzzle was solved much more easily when framed in
terms of motion. The basic principle of framing is the passive acceptance of the formulation given. The brain mechanisms
that support the comprehension of language have a substantial ability to strip the surface details and get to the gist of
meaning in an utterance, but this ability is limited as well. Also, highly accessible features influence decisions, whereas
features of low accessibility are largely ignored (while highly accessible features may not be relevant for a good decision).
Part 3: Changes or States: Prospect Theory
Perception is reference dependent: the perceived attributes of a focal stimulus
reflect the contrast between that stimulus and a context of prior and concurrent
stimuli. For example: a grey box looks less bright in a big darker box than in a lighter
box. An account of perceived brightness also requires a parameter for a reference
value (called adaptation level), which is influenced by the luminance of neighboring
areas. The reference value to which current stimulation is compared also reflects the
history of adaptation to prior stimulation.
Reference Dependence in Choice
There is noticed that reference dependence is incompatible with the standard interpretation of expected utility theory: the
prevailing theoretical model of risky choice. Bernoulli proposed that the value of a gamble is the probability-weighted
average of the psychological values (utilities) of its outcomes, which he defined as states of wealth. He concluded that the
utility function of wealth is logarithmic. The idea is easily shown to be wrong: the Bernoulli’s error. His model of utility is
flawed because it’s reference independent: it assumes that the utility that is assigned to a given state of wealth does not vary
with the decision maker’s initial state of wealth.
The prospect theory: the model of risky choice. The theory states that investors value gains and losses differently, placing
more weight on perceived gains versus perceived losses. For example: there is 50% chance to win 150 dollar, and 50% chance
to lose 100 dollar. The experimental evidence shows that most people reject a gamble with even chances to win and lose
unless the possible win is at least twice the size of the possible loss.
The abrupt transition from risk aversion to risk seeking could not plausibly be explained by a utility function for wealth.
Preferences appeared to be determined by attitudes to gains and losses, defined relative to a reference point. Bernoulli
didn’t incorporate a reference point. The prospect theory embraces the idea that preferences are reference dependent and
includes the extra parameter that is required by this assumption.
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