Cognitive Psychology 2

Thinking: Judgement and Decision Making

Alan Gow
What is thinking?
• …process by which a new
mental representation is formed through the
transformation of information

• ….interaction of judging, abstracting, reasoning,

imagining, problem solving, logic, concept
formation, creativity, and intelligence
What is thinking?
• …process by which a new
mental representation is formed through the
transformation of information

• ….interaction of judging, abstracting, reasoning,

imagining, problem solving, logic, concept
formation, creativity, and intelligence

• …same brain regions for all processes

Outline of next 3 lectures
• Lecture 1: Judgement and Decision Making

• Lecture 2: Inductive and Deductive Reasoning

• Lecture 3: Problem Solving and Expertise

• …Different processes within the general

umbrella of thinking
Outline of next 3 lectures
• Lecture 1: Judgement and Decision Making

• Lecture 2: Inductive and Deductive Reasoning

• Lecture 3: Problem Solving and Expertise

• …Different processes within the general

umbrella of thinking
Judgement versus Decision
Making?
Judgement versus Decision
Making?
• Judgement
– Part of the decision making process
– Uses cues (also ambiguous)
– Accuracy (right/wrong)
• Decision Making
– Choosing among options
– Takes into account consequences
– Factors influencing preferences (i.e.
personality, emotions)
Judgement versus Decision
Making?
• Judgement
– Part of the decision making process
– Uses cues (also ambiguous)
– Accuracy (right/wrong)
• Decision Making
– Choosing among options
– Takes into account consequences
– Factors influencing preferences (i.e.
personality, emotions)
Judgement
A cab was involved in a hit and run accident at night. Two
cab companies, the Green and the Blue, operate in the
city. 85% of the cabs in the city are Green and 15% are
Blue.

A witness identified the cab as Blue. The court tested the

reliability of the witness under the same circumstances
that existed on the night of the accident and concluded
that the witness correctly identified each one of the two
colours 80% of the time and failed 20% of the time.

What is the probability that the cab involved in the

accident was Blue rather than Green knowing that this
witness identified it as Blue?
Judgement
• Taxi cab problem (Kahneman & Tversky,
1972)

• What is the probability that the cab involved in

the accident was Blue rather than Green
knowing that this witness identified it as Blue?
Judgement
• Taxi cab problem (Kahneman & Tversky,
1972)

• What is the probability that the cab involved in

the accident was Blue rather than Green
knowing that this witness identified it as Blue?

• Most people gave probabilities over 50%, and

some gave answers over 80%
Judgement
• Taxi cab problem (Kahneman & Tversky,
1972)

• What is the probability that the cab involved in

the accident was Blue rather than Green
knowing that this witness identified it as Blue?

• Most people gave probabilities over 50%, and

some gave answers over 80% (correct = 41%)
Judgement
• BAYES PROBABILITY THEOREM
– Prior odds and likelihood ratio
 Judgement
• BAYES PROBABILITY THEOREM
– Prior odds and likelihood ratio
Probability of HA Probability of evidence if HA is correct

P(HA/D) P(HA) P(D/HA)

P(HB/D) P(HB) P(D/HB)

Probability of HB Probability of evidence if HB is correct

Prob of HA and HB Before new data

in the light of new data
 Probability of HA Probability of evidence if HA is correct

P(HA/D) P(HA) P(D/HA)

P(HB/D) P(HB) P(D/HB)

Probability of HB Probability of evidence if HB is correct

Accident

Blue Green .12

.15 .85 ------ = .41 it was blue
.12+.17
Correct Incorrect Correct Incorrect
Blue Green Green Blue
.80 .20 .80 .20

.15*.80 =.12 .85*.20 =.17

 Probability of HA Probability of evidence if HA is correct

P(HA/D) P(HA) P(D/HA)

P(HB/D) P(HB) P(D/HB)

Probability of HB Probability of evidence if HB is correct

Probability of HA Probability of evidence if HA is correct

P(HA/D) .15 .80

P(HB/D) .85 .20

Probability of HB Probability of evidence if HB is correct
Judgement
• What is the probability that the cab involved in the
accident was Blue rather than Green knowing that this
witness identified it as Blue?
• If we use Bayes theorem:
– There is a 12% chance (15% times 80%) of the
witness correctly identifying a blue cab
– There is a 17% chance (85% times 20%) of the
witness incorrectly identifying a green cab as blue
– There is therefore a 29% chance (12% plus 17%)
the witness will identify the cab as blue
– This results in a 41% chance (12% divided by 29%)
that the cab identified as blue is actually blue
Judgement
• What is the probability that the cab involved in the
accident was Blue rather than Green knowing that this
witness identified it as Blue?
• If we use Bayes theorem:
– There is a 12% chance (15% times 80%) of the
witness correctly identifying a blue cab
– There is a 17% chance (85% times 20%) of the
witness incorrectly identifying a green cab as blue
– There is therefore a 29% chance (12% plus 17%)
the witness will identify the cab as blue
– This results in a 41% chance (12% divided by 29%)
that the cab identified as blue is actually blue
Judgement
• Taxi cab problem (Kahneman & Tversky,
1972)

• Most people gave probabilities over 50%, and

some gave answers over 80% (correct = 41%)
– Solve it ignoring the base rate of information!
Heuristics
• Jack is a 45 year old man. He is married and
has four children. He is generally conservative,
careful, and ambitious. He shows no interest in
political and social issues and spends most of
his free time on his many hobbies, which
include home carpentry, sailing and numerical
puzzles.

• Engineer or lawyer?
Heuristics
• Jack is a 45 year old man. He is married and
has four children. He is generally conservative,
careful, and ambitious. He shows no interest in
political and social issues and spends most of
his free time on his many hobbies, which
include home carpentry, sailing and numerical
puzzles.
• Description is selected at random from a total of
100 descriptions: 70 of them are engineers and
30 are lawyers
Heuristics
• Jack is a 45 year old man. He is married and
has four children. He is generally conservative,
careful, and ambitious. He shows no interest in
political and social issues and spends most of
his free time on his many hobbies, which
include home carpentry, sailing and numerical
puzzles.
• Description is selected at random from a total of
100 descriptions: 30 of them are engineers and
70 are lawyers
Heuristics
• Engineer or lawyer (Kahneman & Tversky, 1973)

• Representativeness heuristic: events that are

representative or typical of a class are assigned a
high probability of occurrence
Heuristics
• Engineer or lawyer (Kahneman & Tversky, 1973)

• Representativeness heuristic: events that are

representative or typical of a class are assigned a
high probability of occurrence
Judgement
• Linda is 31 years old, single, outspoken, and very
bright
• She majored in philosophy
• As a student, she was deeply concerned with
issues of discrimination and social justice, and also
participated in anti-nuclear demonstrations

• Which is more probable?

– Linda is a bank teller
– Linda is a bank teller and is active in the feminist
movement
Heuristics
• Apparently humans use…heuristics
• Which is more probable?
Heuristics
• Apparently humans use…heuristics
• Which is more probable?
– Linda is a bank teller
Heuristics
• Apparently humans use…heuristics
• Which is more probable?
– Linda is a bank teller
Heuristics
• Apparently humans use…heuristics
• Which is more probable?
– Linda is a bank teller

• Two events occurring together are less

probable than one occurring alone
– Error: conjunction fallacy
– Reduces effort, but biases
Heuristics
• Apparently humans use…heuristics
– Reduces effort, but biases
• Representativeness heuristic (Kellogg, 1995)
– Estimates of the probability of an event are
influenced by:
• a. Availability of the event
• b. How similar it is to the essential
properties of its population
Heuristics
• Which one has the larger population?
– Herne or Cologne
• Recognition heuristic (Goldstein et al., 2002)
– Estimates of the probability of an event are
influenced by presence of stimuli in memory
– “if one of two objects is recognized, infer that
the recognized obj. has the higher value with
respect to the criterion”
– Familiarity info can be accessed more rapidly
– use under time/cognitive pressures
Heuristics
• Which one has the larger population?
– Herne or Cologne
• Recognition heuristic (Goldstein et al., 2002)
– Estimates of the probability of an event are
influenced by presence of stimuli in memory
– “if one of two objects is recognized, infer that
the recognized obj. has the higher value with
respect to the criterion”
– Familiar information can be accessed more
rapidly – use under time/cognitive pressures
Heuristics
• Availability heuristic (Tversky & Kahneman,
1974)
– Estimates of the probability of an event are
influenced by the ability to recall information:
if something is recalled/noticed it must be
important
Heuristics
• But not always…
• i.e. availability heuristic
– Bush – Stevenson
– Clinton – Woodall
Heuristics
• Support theory:
– Role of description of events (higher
subjective probability for a described event –
impacts also experts)

– i.e. Experiments after 9/11 (likelihood of

another attack by al Qaeda/not al Qaeda
Heuristics
• Support theory:
– Role of description of events (higher
subjective probability for a described event –
impacts also experts)

– i.e. Experiments after 9/11 (likelihood of

another attack by al Qaeda/not al Qaeda
– But role of emotions and quality of
information (for example, media)
Heuristics
• Use of the term heuristics
– How is effort reduced?
• Misunderstanding of the problem
– Rather than heuristic error
• Lab studies
• Emphasis on biased/error prone judgments
– Many people make correct judgements
Judgement
• Natural frequency hypothesis (Gigerenzer &
Hoffrage, 1999)
– Sampling of natural events
– Put forward an evolutionary account of the
strengths and weaknesses of human
judgement
• Use of frequencies instead of probabilities,
percentages, statistics
– Frequency: number of events occurring in a
time window
Judgement
• “If we are so dumb, why are we so smart?”
Judgement
• False positive scenario

• Knowing that there is only one cause versus

knowing that there might be other causes
Judgement
• False positive scenario

• Knowing that there is only one cause versus

knowing that there might be other causes

• Causal knowledge (Sloman, 2005)

– Explains why we succeed in real life – we are
hardwired to see causality
Judgement
• Dual process model for judgement (Kahneman,
2003; Kahneman & Frederick, 2007)
– A fast route, more difficult to control
(heuristics)
– A slow route, analytical and controlled
(operations) that also monitors route 1
Heuristic
Judgement
Problem Context?
Analytical operation
Judgement
• System 1: automatic, immediate, emotionally
charged, difficult to control, implicit, effortless

• System 2: more analytical, controlled, rule

based, slower, effortful, conscious

Heuristic
Judgement
Problem Context?
Analytical operation
Judgement
• In a study, 1000 people were tested. Among the
participants there were four men and 996 women.
Jo is a randomly chosen participant of this study.
Jo is 23 years old and is finishing a degree in
engineering. On Friday nights, Jo likes to go out
cruising with friends while listening to loud music
and drinking beer

• What is most likely?

– a. Jo is a man
– b. Jo is a woman
Judgement
• Uses cues (also ambiguous)
• Heuristics
• Support Information/Descriptions
• Natural frequencies
– Accuracy (right/wrong)
• Decision Making: when things are more
complex…
– Choosing among options
– Takes into account consequences
– Factors influencing preferences (i.e. personality,
emotions)
Judgement
• Uses cues (also ambiguous)
• Heuristics
• Support Information/Descriptions
• Natural frequencies
– Accuracy (right/wrong)
• Decision Making: when things are more
complex…
– Choosing among options
– Takes into account consequences
– Factors influencing preferences (i.e. personality,
emotions)
Decision Making
• Humans are not rational decision makers (≠
normative theories – behave rationally and
select the best option)
– i.e. von Neumann (1947) – utility
maximization when deciding
• When we make choices, we assess the
expected value of each one
– Really?
– In real world many factors; decisions differ in
complexity
Decision Making
• Humans are not rational decision makers (≠
normative theories – behave rationally and
select the best option)
– i.e. von Neumann (1947) – utility
maximization when deciding
• When we make choices, we assess the
expected value of each one
– Really?
– In real world many factors; decisions differ in
complexity
Decision Making
• £200 gain if a tossed coin is heads
• And loss of £100 if tails

• A sure gain of £800 OR

• 85% probability of gaining £1000 with a 15%
probability of nothing

• A sure loss of £800 OR

• 85% probability of losing £1000 with a 15%
probability of no loss
Decision Making
• £200 gain if a tossed coin is heads
• And loss of £100 if tails Average gain £50 per toss

• A sure gain of £800 OR

• 85% probability of gaining £1000 with a 15%
probability of nothing

• A sure loss of £800 OR

• 85% probability of losing £1000 with a 15%
probability of no loss
Decision Making
• £200 gain if a tossed coin is heads
• And loss of £100 if tails Average gain £50 per toss
– Two thirds refuse to bet
• A sure gain of £800 OR
• 85% probability of gaining £1000 with a 15%
probability of nothing

• A sure loss of £800 OR

• 85% probability of losing £1000 with a 15%
probability of no loss
Decision Making
• £200 gain if a tossed coin is heads
• And loss of £100 if tails Average gain £50 per toss
– Two thirds refuse to bet
• A sure gain of £800 OR £800 gain
• 85% probability of gaining £1000 with a 15%
probability of nothing £850 gain

• A sure loss of £800 OR

• 85% probability of losing £1000 with a 15%
probability of no loss
Decision Making
• £200 gain if a tossed coin is heads
• And loss of £100 if tails Average gain £50 per toss
– Two thirds refuse to bet
• A sure gain of £800 OR £800 gain
• 85% probability of gaining £1000 with a 15%
probability of nothing £850 gain
– Majority preferred £800 gain
• A sure loss of £800 OR
• 85% probability of losing £1000 with a 15%
probability of no loss
Decision Making
• £200 gain if a tossed coin is heads
• And loss of £100 if tails Average gain £50 per toss
– Two thirds refuse to bet
• A sure gain of £800 OR £800 gain
• 85% probability of gaining £1000 with a 15%
probability of nothing £850 gain
– Majority preferred £800 gain
• A sure loss of £800 OR £800 loss
• 85% probability of losing £1000 with a 15%
probability of no loss £850 loss
Basic decision making
• Prospect theory (Kahneman & Tversky, 1979)
– Identification of reference point (current
state)
– Loss aversion (greater sensitivity to losses)
Basic decision making
• Prospect theory (Kahneman & Tversky, 1979)

Unwilling to accept
bets with potential
losses even though
potential gains
outweigh the losses
Basic decision making
• Prospect theory (Kahneman & Tversky, 1979)

Unwilling to accept
bets with potential
losses even though
potential gains
outweigh the losses
Basic decision making
• Individual differences (more adjustments to
justify previous choices)

• Sunk cost effect (more investment to justify

previous choices)
– i.e. Sticking with a “bad” partner for years
before leaving them!
– Much less present in children and animals
Basic decision making
• Imagine that Edinburgh is preparing for the
outbreak of an unusual disease, which is expected
to kill 600 people.

• Two alternative programs:

– If program A is adopted: 200 people will be
saved
– If program B is adopted: 1/3 probability that 600
people will be saved and 2/3 probability that
nobody will be saved
• **Which one will you adopt?**
Basic decision making
• Imagine that Edinburgh is preparing for the
outbreak of an unusual disease, which is expected
to kill 600 people.

• Two alternative programs:

– If program A is adopted: 200 people will be
saved 72% chose A
– If program B is adopted: 1/3 probability that 600
people will be saved and 2/3 probability that
nobody will be saved
• **Which one will you adopt?**
Basic decision making
• Imagine that Edinburgh is preparing for the
outbreak of an unusual disease, which is expected
to kill 600 people.

• Two alternative programs:

– If program A is adopted: 200 people will be
saved 72% chose A
– If program B is adopted: 1/3 probability that 600
people will be saved and 2/3 probability that
nobody will be saved 200 saved; 400 die
• **Which one will you adopt?**
Basic decision making
• Framing effect
– Wording of problem makes the difference
– Idea of saving 200 lives more salient?
– i.e. disease problem: can be modified by
sample size and type of patients
Basic decision making
• More weight to low probability events
(especially if decision not based on experience)
Basic decision making
• More weight to low probability events
(especially if decision not based on experience)

• Aversions for loss: Neuroeconomics (cognitive

neuroscience used to understand decision
making in the economic environment)
Basic decision making
• Child had ten chances in 10,000 of dying from flu during
epidemic if not vaccinated. The vaccine was certain to
prevent the child from catching flu, but had potentially
fatal side effects
– People chose not to vaccinate their children even
when the likelihood of the vaccine causing death
was much lower than the death rate from the
disease against which the vaccine protects
• Why?ould feel more responsible for the death of their
child if it resulted from their own actions rather than in
action (anticipated regret)
• Omission bias: the tendency to prefer inaction to action
when engaged in risky DM
Basic decision making
• Child had ten chances in 10,000 of dying from flu during
epidemic if not vaccinated. The vaccine was certain to
prevent the child from catching flu, but had potentially
fatal side effects
– People chose not to vaccinate their children even
when the likelihood of the vaccine causing death
was much lower than the death rate from the
disease against which the vaccine protects
• Why? Feel more responsible for death of child if it
resulted from own actions rather than inaction
(anticipated regret)
• Omission bias: the tendency to prefer inaction to action
when engaged in risky decision making
Basic decision making
• Role of emotions
– Impact bias: Overestimate intensity and
duration of our negative emotions
– Anxiety: Impact of sunk cost effects
– Omission bias: Not taking action better than
taking action (anticipated regret)
– Status quo bias: Repetition of choices in
spite of changes in preferences
Basic decision making
• Rational-emotional model:
– Decision making influenced by rational
factors based on inferences and outcome
information, plus experiences and
anticipated emotions
Basic decision making
• Rational-emotional model:
– Decision making influenced by rational
factors based on inferences and outcome
information, plus experiences and
anticipated emotions
• Social-functionalist approach:
– People often behave like intuitive politicians
who need to justify their decisions to others
Complex decision making
• Real-life problems
Complex decision making
• Multi-attribute utility theory (Wright, 1984)
– Identify features relevant for the decision
– Decide how to weight them
– Sum of weights = total utility
– Select option with highest total
• Renting a flat
– Identify number of rooms and location
– Give each feature a weight:
– Flat 1: rooms = .5, location = .3
– Flat 2: rooms = .6, location = .2
– Sum of weights = .8 in both cases!
– Select option nearer to uni?
Complex decision making
• Multi-attribute utility theory (Wright, 1984)
– Identify features relevant for the decision
– Decide how to weight them
– Sum of weights = total utility
– Select option with highest total
• Renting a flat
– Identify number of rooms and location
– Give each feature a weight:
– Flat 1: rooms = .5, location = .3
– Flat 2: rooms = .6, location = .2
– Sum of weights = .8 in both cases!
– Select option nearer to uni?
Complex decision making
• Multi-attribute utility theory (Wright, 1984)
– Choosing a partner?

• Identify a couple of potential partners: Brad and Johnny

– Give each partner a weight on relevant features:
– Brad: beauty = .5, age = .3 (younger), money = .8
– Johnny: beauty = .6 (cooler), age = .2, money = .8
– Sum of weights = 1.6 in both cases!

– Select option with less previous wives?

Complex decision making
• Bounded rationality (Simon, 1957)
• Produce reasonable solutions in spite of
limitations
– Constraints: environment (limited info), mind
(limited attention, memory)…
– Use of heuristics (i.e. satisficing) [selection of
options that are minimal requirements of
satisfaction and sufficing]
Complex decision making
• Bounded rationality (Simon, 1957)
Complex decision making
• Elimination by aspects theory (Tversky, 1972)
– Similar to previous theory, one option
considered at the time
Summarising judgement
• Humans: not Bayesian reasoners, we use…
– Heuristics [reduces effort, but biases: i.e.
conjunction fallacy (bank teller + feminist
problem)]
• Representativeness heuristic (Kellogg, 1995)
– a. Availability of the event
– b. How similar it is to the essential properties
of its population
• Recognition heuristic (Goldstein et al., 2002)
– presence of stimuli in memory.
Summarising judgement
• Availability heuristic (Tversky & Kahneman,
1974)
– If something is recalled/noticed it must be
important
• Support theory
– Role of description of events (higher subjective
probability for a described event – impacts also
experts)
• Natural frequency hypothesis (Gigerenzer &
Hoffrage, 1999)
– Sampling of natural events
Summarising decision making
• Individual differences (more adjustments to justify
previous choices)
• Sunk cost effect (more investment to justify
previous choices)
– Much less present in children and animals
• Framing effect (wording of problem makes the
difference)
– i.e. disease problem: can be modified by sample
size and type of patients
• More weight to low probability events (especially if
decision not based on experience)
Summarising decision making
• Role of emotions
– Impact bias: Overestimate intensity and
duration of our negative emotions
– Anxiety: Impact of sunk cost effects
– Omission bias: Not taking action better than
taking action (anticipated regret)
– Status quo bias: Repetition of choices in
spite of changes in preferences
Summary
• Judgement and Decision Making (simple &
complex)

• Apparently humans use ….

– Heuristics
– Support Information/Descriptions
– Natural frequencies
• But we see causal links!
Summary
• Increase in complexity
– Bounded rationality (Simon, 1957)
– Elimination by aspects theory (Tversky,
1972)
– Multi-attribute utility theory? (Wright,
1984)…we are not very good with
probabilities and weights
Reading
• Eysenck and Keane, Cognitive Psychology (6th
Edition)
– Chapter 13