October 31, 2007 12:31. We love stories. Heuristics were popularised by Gerd Gigerenzer, about how these short cuts help us in our everyday lives. Understand when someone or some organization maybe providing you selective information to sway your decision. It creates in the mind of a prospect the perception that no other product in the market quite like your product — Al Ries. The authors point out that this theory is applied to the simple situation where a person is presented with two alternatives and that different processes may be used to make a decision in more complicated situations. Instances of this effect violate a basic concept of utility theory, that choices between prospects are determined completely by the probabilities of final states. Really good discussion before his Antifragility book. 4157. When using the representativeness heuristic, people make judgments about probability based on how well it represents, or is similar to a stereotype they are familiar with. After definitions of the various components of the theory are given, they are discussed in more detail, again with examples of studies given as validation. The closer it resembles the stereotype, the higher they consider the probability to be that it fits the stereotype. Beant Dhillon | I recommend Kahneman’s book, Thinking Fast and Slow, to anyone who still reads long non-fiction books. Prospect theory differentiates two phases in the process of making a choice: editing followed by evaluation. Belief in the law of small numbers Amos Tversky and Daniel Kahneman; 3. Posted by Ling Rothrock on October 31, 2007 12:05 PM Different concepts, such as game theory, power and bargaining, and games against nature, attempt to explain how decisions are made with imperfect competition assumed. I have this framed on my desk for a few years but as Kahneman says being aware of your biases does NOT mean you will always make good decisions but at least you will have a more rational post reasoning. Schwarz, N, Vaughn, LA (2002) The availability heuristic revisited: Ease of recall and content of recall as distinct sources of Information. The main criticism is that the traditional rules are such a simplification of reality that it is almost useless unless other factors are considered. Posted by This heuristic is affected by some biases which are due to the irretrievability of instances which may be related to the familiarity of the subject. When people are presented with multiple alternatives to choose from, they first code the alternatives into gains and losses relative to a reference point. o Misconceptions of chance. It is about how we behave, make judgements and react to different situations. In all cases, there is also the assumption of fixed and known alternatives, whereas this is rarely the case in realistic situations. So vague problems mean the decision-maker has to cautiously choose safe probabilities, and so those probabilities stay above the very low levels more often. o Insensitivity to sample size. Don’t be too active 2. Gave examples from his work with patient experience when it comes to colonoscopies (yes, not a good topic to bring up during dinner but it made the point). The central idea of the “heuristics and biases” program – … Then came the Clinton/Gingrich era and how divided Americans were in either support or opposition. It is a collection of some of the most influential articles in the field. It then points out that there are situations in which a personâs frame of reference shifts and decisions are made based on expectations of future states rather than the current state. It operates automatically with little or no effort or no sense of voluntary control and generates impressions, feelings and inclinations. 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