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Ambiguity Effect
The ambiguity effect is a cognitive tendency where decision making is affected by a lack of information, or "ambiguity". The effect implies that people tend to select options for which the probability of a favorable outcome is known, over an option for which the probability of a favorable outcome is unknown. The effect was first described by Daniel Ellsberg in 1961. Example As an example, consider a bucket containing 30 balls. The balls are either red, black or white. Ten of the balls are red, and the remaining 20 are either black or white, with all combinations of black and white being equally likely. In option X, drawing a red ball wins a person $100, and in option Y, drawing a black ball wins them $100. The probability of picking a winning ball is the same for both options X and Y. In option X, the probability of selecting a winning ball is 1 in 3 (10 red balls out of 30 total balls). In option Y, despite the fact that the number of black balls is uncertain, the probability of ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Decision Making
In psychology, decision-making (also spelled decision making and decisionmaking) is regarded as the cognitive process resulting in the selection of a belief or a course of action among several possible alternative options. It could be either rational or irrational. The decision-making process is a reasoning process based on assumptions of values, preferences and beliefs of the decision-maker. Every decision-making process produces a final choice, which may or may not prompt action. Research about decision-making is also published under the label problem solving, particularly in European psychological research. Overview Decision-making can be regarded as a problem-solving activity yielding a solution deemed to be optimal, or at least satisfactory. It is therefore a process which can be more or less rational or irrational and can be based on explicit or tacit knowledge and beliefs. Tacit knowledge is often used to fill the gaps in complex decision-making processes. Usua ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Probability
Probability is a branch of mathematics and statistics concerning events and numerical descriptions of how likely they are to occur. The probability of an event is a number between 0 and 1; the larger the probability, the more likely an event is to occur."Kendall's Advanced Theory of Statistics, Volume 1: Distribution Theory", Alan Stuart and Keith Ord, 6th ed., (2009), .William Feller, ''An Introduction to Probability Theory and Its Applications'', vol. 1, 3rd ed., (1968), Wiley, . This number is often expressed as a percentage (%), ranging from 0% to 100%. A simple example is the tossing of a fair (unbiased) coin. Since the coin is fair, the two outcomes ("heads" and "tails") are both equally probable; the probability of "heads" equals the probability of "tails"; and since no other outcomes are possible, the probability of either "heads" or "tails" is 1/2 (which could also be written as 0.5 or 50%). These concepts have been given an axiomatic mathematical formaliza ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Daniel Ellsberg
Daniel Ellsberg (April 7, 1931June 16, 2023) was an American political activist, economist, and United States military analyst. While employed by the RAND Corporation, he precipitated a national political controversy in 1971 when he released the ''Pentagon Papers'', a top-secret The Pentagon, Pentagon study of Federal government of the United States, U.S. government decision-making in relation to the Vietnam War, to ''The New York Times'', ''The Washington Post'', and other newspapers. In January 1973, Ellsberg was charged under the Espionage Act of 1917 along with other charges of theft and conspiracy, carrying a maximum sentence of 115 years. Because of governmental misconduct and illegal evidence-gathering (committed by the same people who later would be involved in the Watergate scandal), and his defense by Leonard Boudin and Harvard Law School professor Charles Nesson, Judge William Matthew Byrne Jr. dismissed all charges against Ellsberg in May 1973. Ellsberg was awarded ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Heuristic
A heuristic or heuristic technique (''problem solving'', '' mental shortcut'', ''rule of thumb'') is any approach to problem solving that employs a pragmatic method that is not fully optimized, perfected, or rationalized, but is nevertheless "good enough" as an approximation or attribute substitution. Where finding an optimal solution is impossible or impractical, heuristic methods can be used to speed up the process of finding a satisfactory solution. Heuristics can be mental shortcuts that ease the cognitive load of making a decision. Context Gigerenzer & Gaissmaier (2011) state that sub-sets of ''strategy'' include heuristics, regression analysis, and Bayesian inference. Heuristics are strategies based on rules to generate optimal decisions, like the anchoring effect and utility maximization problem. These strategies depend on using readily accessible, though loosely applicable, information to control problem solving in human beings, machines and abstract i ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Journal Of Behavioral Decision Making
The ''Journal of Behavioral Decision Making'' is a peer-reviewed academic journal covering the study of psychological decision-making processes. It was established in 1988 and is published five times per year by John Wiley & Sons. The editor-in-chief is George Wright ( Strathclyde Business School). According to the ''Journal Citation Reports'', the journal has a 2020 impact factor The impact factor (IF) or journal impact factor (JIF) of an academic journal is a type of journal ranking. Journals with higher impact factor values are considered more prestigious or important within their field. The Impact Factor of a journa ... of 2.438, ranking it 52nd out of 83 journals in the category "Psychology, Applied". References External links * Applied psychology journals Wiley (publisher) academic journals Academic journals established in 1988 English-language journals Decision-making 5 times per year journals {{psychology-journal-stub ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Ambiguity Aversion
In decision theory and economics, ambiguity aversion (also known as uncertainty aversion) is a preference for known risks over unknown risks. An ambiguity-averse individual would rather choose an alternative where the probability distribution of the outcomes is known over one where the probabilities are unknown. This behavior was first introduced through the Ellsberg paradox (people prefer to bet on the outcome of an urn with 50 red and 50 black balls rather than to bet on one with 100 total balls but for which the number of black or red balls is unknown). There are two categories of imperfectly predictable events between which choices must be made: risky and ambiguous events (also known as Knightian uncertainty). Risky events have a known probability distribution over outcomes while in ambiguous events the probability distribution is not known. The reaction is behavioral and still being formalized. Ambiguity aversion can be used to explain incomplete contracts, volatility in stoc ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Black Swan Theory
The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. The term arose from a Latin expression which was based on the presumption that black swans did not exist. The expression was used in the original manner until around 1697 when Dutch mariners saw black swans living in Australia. After this, the term was reinterpreted to mean an unforeseen and consequential event. The reinterpreted theory was articulated by Nassim Nicholas Taleb, starting in 2001, to explain: # The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology. # The non-computability of the probability of consequential rare events using scientific methods (owing to the very nature of small probabilities). # The psychological biases that bl ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Decision Theory
Decision theory or the theory of rational choice is a branch of probability theory, probability, economics, and analytic philosophy that uses expected utility and probabilities, probability to model how individuals would behave Rationality, rationally under uncertainty. It differs from the Cognitive science, cognitive and Behavioural sciences, behavioral sciences in that it is mainly Prescriptive economics, prescriptive and concerned with identifying optimal decision, optimal decisions for a rational agent, rather than Descriptive economics, describing how people actually make decisions. Despite this, the field is important to the study of real human behavior by Social science, social scientists, as it lays the foundations to Mathematical model, mathematically model and analyze individuals in fields such as sociology, economics, criminology, cognitive science, moral philosophy and political science. History The roots of decision theory lie in probability theory, developed by Blai ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Ellsberg Paradox
In decision theory, the Ellsberg paradox (or Ellsberg's paradox) is a paradox in which people's decisions are inconsistent with subjective expected utility theory. John Maynard Keynes published a version of the paradox in 1921. Daniel Ellsberg popularized the paradox in his 1961 paper, "Risk, Ambiguity, and the Savage Axioms". It is generally taken to be evidence of ambiguity aversion, in which a person tends to prefer choices with quantifiable risks over those with unknown, incalculable risks. Ellsberg's findings indicate that choices with an underlying level of risk are favored in instances where the likelihood of risk is clear, rather than instances in which the likelihood of risk is unknown. A decision-maker will overwhelmingly favor a choice with a transparent likelihood of risk, even in instances where the unknown alternative will likely produce greater utility. When offered choices with varying risk, people prefer choices with calculable risk, even when those choices ha ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Prospect Theory
Prospect theory is a theory of behavioral economics, judgment and decision making that was developed by Daniel Kahneman and Amos Tversky in 1979. The theory was cited in the decision to award Kahneman the 2002 Nobel Memorial Prize in Economics. Based on results from controlled studies, it describes how individuals assess their loss and gain perspectives in an asymmetric manner (see loss aversion). For example, for some individuals, the pain from losing $1,000 could only be compensated by the pleasure of earning $2,000. Thus, contrary to the expected utility theory (which models the decision that perfectly rational agents would make), prospect theory aims to describe the actual behavior of people. In the original formulation of the theory, the term ''prospect'' referred to the predictable results of a lottery. However, prospect theory can also be applied to the prediction of other forms of behaviors and decisions. Prospect theory challenges the expected utility theory deve ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Risk Aversion
In economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter is equal to or higher in monetary value than the more certain outcome. Risk aversion explains the inclination to agree to a situation with a lower average payoff that is more predictable rather than another situation with a less predictable payoff that is higher on average. For example, a risk-averse investor might choose to put their money into a bank account with a low but guaranteed interest rate, rather than into a stock that may have high expected returns, but also involves a chance of losing value. Example A person is given the choice between two scenarios: one with a guaranteed payoff, and one with a risky payoff with same average value. In the former scenario, the person receives $50. In the uncertain scenario, a coin is flipped to decide whether the person receives $100 or nothing. ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
VUCA
VUCA is an acronym based on the leadership theories of Warren Bennis and Burt Nanus, to describe or to reflect on the volatility, uncertainty, complexity and ambiguity of general conditions and situations. The U.S. Army War College introduced the concept of VUCA in 1987, to describe a more complex multilateral world perceived as resulting from the end of the Cold War. More frequent use and discussion of the term began from 2002. It has subsequently spread to strategic leadership in organizations, from for-profit corporations to education. Meaning The VUCA framework provides a lens through which organizations can interpret their challenges and opportunities. It emphasizes strategic foresight, insight, and the behavior of entities within organizations. Furthermore, it highlights both systemic and behavioral failures often associated with organizational missteps. V = ''Volatility'': Characterizes the rapid and unpredictable nature of change. U = ''Uncertainty'': Denotes the unp ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
