Session 4: (January
27/28) The Representativeness and Availability Heuristics
Link
to Week 4 Survey (due by start of Super Bowl, Jan 26)
Week 4 Writing Assignment (if chosen,
turn in at class).
Students, I encourage you to come up with your own original ideas rather
than simply regurgitate ideas from our discussion. Be creative!
Option 1: Bayes Rule and the more general idea of Bayesian updating
are a mathematical formula and big-picture concept for the "correct"
use of aggregating new data with old opinions. Explain it thoroughly in qualitative terms, and give an example (numerical
or qualitative) that has not been covered in class, where answers using
Bayes Rule and human intuition are very different.
You have been chosen the Decision Making czar within your organization.
What prescriptive Bayesian measures can you recommend to improve the quality of
your firm's decisions? Are there limitations to the Bayesian model?
Option 2:
1) Decision Trees are
powerful tools for decision-making, but a "man's gotta know" their limitations.
What are they? i.e. strengths and weaknesses. Are there any factors that are not
effectively considered when this approach is adopted for decision-making?
You have been chosen the Decision Making czar within your organization.
You have decided to insist that all major decision analyses are accompanied by
Decision Tree analyses. Is this a good edict? Why or why not? When or when not?
Week
4 PowerPoint slides
Topics:
- The
conjunction Fallacy
- Base Rates and Regression to the Mean
- The
Fallacy of Intervention
- Overuse of Causal Data
- The Hot Hand
- Local
Representativeness
- Sample and Storage Biases
- Vividness
- Simpson's
Paradox
Note
for Week 5: You may want to start reading the required textbook Influence
(by Cialdini) now.
AFTER-CLASS
Readings:
(very important classics but somewhat academic)
****
Kahneman and Tversky, Extentional Versus Intuitive Reasoning: The Conjunction
Fallacy In Probability Judgment, CP #8
**** Kahneman and
Tversky, Subjective Probability: A Judgment of Representativeness, CP #9
****
Kahneman and Tversky, Availability: A Heuristic for Judging Frequency and Probability,
CP #10