Professional Documents
Culture Documents
Week 5 - 2019
Week 5 - 2019
Week 5 - 2019
Making I
Last Class
1. Moral disengagement
2. Six rules of persuasion
3. Kidney case winning teams
A4: Teams 3, 1, 9, 6, 7
A5: Teams 6, 7, 3, 4, 8
NUS Presentation Title 2006
Today
1. System 1 vs. System 2
2. Discussion of various biases
3. Judgment in a Crisis simulation
NUS Presentation Title 2006
Auction
• No collusion and communication.
• The highest bidder pays what they bid and receives $20.
• Bidding starts at $1, proceeds in $1 increments.
• The second highest bidder pays what they bid.
NUS Presentation Title 2006
NUS Presentation Title 2006
Job A 2 3 5 4 3.6
Job B 4 5 3 5 4.2
Job C 3 4 2 5 3.4
NUS Presentation Title 2006
Bounded Rationality
• Respond to a complex problem by reducing the problem to
a level at which it can be readily understood
Satisficing
Focus on a narrower set of criteria
Evaluate smaller set of options
Inexact estimation in evaluation
Select first acceptable solution, even if it is not optimal
Maybe use previous solution
NUS Presentation Title 2006
• •
System 1
System 2
Automatic Attentional
• Fast • Slow
• Little or no effort • Effortful
• No sense of • Subjective
voluntary control experience of
choice
NUS Presentation Title 2006
Intuition (System 1)
• Outside of conscious thought
• Often laden with affect (mood/emotion)
• Holistic
• Very fast
• Often based on experience
• Effective when experience is high and situation matches
experience; much less effective otherwise
NUS Presentation Title 2006
NUS Presentation Title 2006
3. In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If
it takes 48 days for the patch to cover the entire lake, how long would it take
for the patch to cover half of the lake?
NUS Presentation Title 2006
3. In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If
it takes 48 days for the patch to cover the entire lake, how long would it take
for the patch to cover half of the lake? 47 days (System 2) vs. 24 days
(System 1)
NUS Presentation Title 2006
Common biases
Escalation of commitment
Availability bias
Randomness error
Loss aversion (prospect theory)
Anchoring bias
Fundamental attribution error
Sunk cost
Decoy bias
Endowment effect
Status quo
And many more….
NUS Presentation Title 2006
Common biases
Escalation of commitment:
Availability bias
Randomness error
Loss aversion (prospect theory)
Anchoring bias
Status quo bias
Fundamental attribution error
Sunk cost
Decoy bias
Endowment effect
And many more….
NUS Presentation Title 2006
Escalation of Commitment
• Initial budget in 1986: $2.5 billion
• Budget increase in 1988: $30 billion
• Budget increase in 2008: $24 billion
V22 Osprey
NUS Presentation Title 2006
Letter K task
• K_ _ _ _ _ _
• __K____
• ~1:3
• Availability/Confirmation biases
NUS Presentation Title 2006
People were shown two studies: One study showed that the death
penalty had a deterrent effect, while the other study provided data
contradicting that finding.
In other words, they favored the study that confirmed what they
already believed. They assimilated data in a biased way.
NUS Presentation Title 2006
Fake news?
• 2016 presidential election (N = 3,500)
• Facebook data: Links shared
• 26% shared 10-100 links; 61% shared more than 100 links
• 8.5% shared 1 one or more fake news to their friends
Guess et al.,
2019 Science
NUS Presentation Title 2006
Randomness error
NUS Presentation Title 2006
Anchoring bias
Anchoring bias
NUS Presentation Title 2006
Cordless
$8.64 $11.82 $13.45 $21.18 $26.18 0.42
trackball
Cordless
$16.09 $26.82 $29.27 $34.55 $55.64 0.52
keyboard
Design
$12.82 $16.18 $15.82 $19.27 $30.00 0.32
book
Neuhaus
$9.55 $10.64 $12.45 $13.27 $20.64 0.42
chocolates
1998 Côtes
$8.64 $14.45 $12.55 $15.45 $27.91 0.33
du Rhône
1996
$11.73 $22.45 $18.09 $24.55 $37.55 0.33
Hermitage
NUS Presentation Title 2006
Status quo
a) Too lazy to make decisions, so accept the default
b) Too difficult to make decisions: The more choices you are given, the
more pull the status quo has
c) Rule of satisficing (“Good enough”), not optimizing
Framing (layoff)
Safe option: 200 of the planned 600 people will be retained
Risky option: 1/3 probability that all 600 people will be retained; 2/3
probability that no one will be retained