Kahneman And Amos Tversky: Article Analysis

In terms of the anchoring bias, regularly revisit of the original decision based on the newly gathered data needs to be set up within the organization. Additionally, the decision maker should avoid the Confirmation Trap in which Bazerman and Moore (2009) argues that people tend to seek information that confirms their expectations and hypotheses. To recognize the bias, Mike Francis could

In this article, the author explains why it is difficult to find the idealist man in today’s society. This piece was written by Kay S. Hymowitz and published in the Wall Street Journal on February 2011. The purpose of this essay is to inform women about “where the good men have gone”, due to the fact they are all becoming “guys” instead of men. When Hymowitz states this, she is referring to a stage between a boy and a man. The author provides evidence telling how men in their twenties have decreased and the amount of “guys” have increased over a period of time. Also, this article could strike up conversation about how the economy has changed by the increase in female roles and decrease in male roles.

The article, “Unnatural Selections” by Barry Schwartz is an inspirational article that shows us all of the default choices that we take for granted in this world. He uses several examples to help give you the overall impression of the article. Along with the examples, Barry creates logic and emotion by the writing style he uses. He creates logic and emotion in his article by using persuasive elements such as evidence and reasoning. Barry Schwartz is a highly known professor of psychology, and has written several books. Therefore, we can be convinced that we are able to trust him as an author. He makes valid points and he does a magnificent job of persuading the readers into believing what he says with his examples.

Two phenomena- hindsight bias and judgmental overconfidence- illustrate why we can’t rely solely on intuition and common sense.

The first area was the availability heuristic section. There were two biases that indicated whether or not you were making the right decision. The first was ease of recall, or the fact that we tend to decide things based on what comes to mind easily. The second was retrievability, the fact that we base decisions on the frequency of a particular pattern or event. We base many of our decisions on these two concepts.

In a decision-making problem, anchoring effects occur when
a seemingly trivial factor serves as a starting point for estimations

One thing which stood out in the text involving both of their ideas was the fact that Tversky had once thought of Kahneman to not be entirely accurate on his ideas. He had questioned Tversky on the basis that peoples’ opinions are subjective; that they differ person to person. An example of this was the coin toss discussed in chapter three of the text. Relating to the coin toss example, the idea that many made assumptions based off of ideas that are insignificant was of great importance and lead to a rejection by both Kahneman and Tversky on the effectiveness of predicted outcomes. In the text, the author states, “Even the fairest coin, given the limitations of its memory and moral sense, cannot be as fair as the gambler expects it to be”. This involves the idea that even when one is certain of the reasoning behind their assumptions, it is logical to assume that everything will not fit the expected outcomes of the reasoner behind it, and their attempt at directly relating the two

This week’s reading Predictably Irrational was very valuable, and informative. While coming up with so many ways of thinking when it comes to behavior, I had no idea even existed. We talked last week about being rational, but this week and this week’s reading it discussed more about irrational, and predictable behavior. At the end of this summary I hope to have showed and understand the difference when it comes to irrational and predictable theories that can disrupt behavior, and decision making.

Behavioural economics is the study of the effects that psychology has on the decision making of the economy. This tends to be the way that people think and feel when they are spending money on a certain good or service. The great economist Adam Smith was the first follower of this idea through his book “The theory of moral sentiments” which dates back to 1759. However, it took over 100 years to get a more clarified meaning of how big of a role the psychology of a buyer plays in economics. In behavioural economics there are seven basic principles which all contribute to the decision making process. Behavioural economics can explain how people will react to different situations such as times when there are no economic problems and times when

According to both Thaler and Sunsteins most human beings do not make decisions that are characterized in the elementary economics textbooks. However, the decisions should be along rich suggestions that enable people to come up with better choices for both ourselves and the society. Various people are likely to be surprised after learning that conditions and the setting in which individuals make the decisions normally tend to influence the choices that are made. This tendency is also likely to affect the decisions that have more significant consequences. This may include for instance how much a family saves and how they also invest, the kind of mortgage they are

In studying framing effects, Kahneman references the following properties: accessibility and rationality. Accessibility is how efficient a person can determine the true value of an object or idea. For example, consider a person driving, but they have forgotten their spectacles. There is an approaching stop sign, however, with the driver’s impaired judgement, they cannot accurately predict how quickly the brakes need to be engaged. The driver’s accessibility to the distance between the car and stop sign is low. Consider the same situation, but with the driver in possession of their spectacles. In this situation, the driver’s accessibility to the distance is higher. Kahneman presents a variation of this dilemma (Problem 1 – The Asian Disease)

Representative Heuristics is used in making judgments under uncertainty. In making judgments, people usually pay attention to the similarity between such event and a standard process. In one example, when I had severe pain and had ulcers in my stomach, everybody in the family asked me about whether I had experienced stress and worries over my life. Everybody was concerned that I was young and had started worrying about life to the point of developing ulcers. In so doing, they referred to a similar case in the neighborhood where severe mental stress had resulted in severe ulcers. Yet, the ulcers were caused by a certain bacterial infection in my stomach. It was successfully treated and I regained my health.

“The best we can do is a compromise:” states Kahneman “learn to recognize situations in which mistakes are likely and try harder to avoid significant mistakes when the stakes are high” (142-143). An Israeli-American psychologist and professor, David Kahneman, was born in Tel Aviv in 1934. He and his family were Jewish and lived in continuous fear of persecution during the Nazi occupation of France from 1940-1944. He received his bachelor’s degree in 1954 and moved to the United States in 1958 to work towards his Ph.D. in psychology. His theories on people’s decision making during uncertain situations earned him the Nobel Memorial Prize in Economics in 2002. Kahneman’s work argues that the two cognitive systems illustrate that the human mind

This distinctive book called, “Thinking, Fast and Slow” by Daniel Kahneman, is one of very few exquisite readings I’ve completed so far. Daniel Kahneman is a psychologist in Princeton University, and due to his research, he won a Nobel Prize in 2002 in economics. In the beginning of his book, he speaks of our cognitive System 1 and System 2 ways of thinking. System 1 generates feelings, impressions, and memory. It is very instinctive, automatic, and is considered quick thinking. System 2 on the other hand, is alert during complex problem solving, while dealing with facts and knowledge, and is attentive while working with difficult calculations. For example, a problem such as 24 x 13, this takes more time and knowledge to figure out (System 2), rather then recognizing an emotion from face expressions (System 1). When System 1 is strained, your System 2 steps in to help you process through that specific instant. Now aside from the psychological portion of this book, Mr. Kahneman divulges about a consolidated economic analysis with elemental intuitions from the psychological perspective; such as, luck and skill, overconfidence, risks in the stock market, factors of success and the decision making process. This book is overall concluded with the understanding of behavioral economics, which is the social and cognitive components on economic decisions that are defined by individuals and have consequences that reflect from making those decisions and taking those risks.

Availability heuristic can be defined as making a choice based on immediate and easy examples that comes to the mind more easily when evaluating a decision. Even though availability heuristic has many pros such as saving time when making a choice, it does come with cons. This is because the availability heuristic distorts our understanding of real threats and risks. For example, Tom is a 10-year-old boy that adores puppies and loves playing with them. One day he saw a puppy bite its owner. Due to this small incident, Tom avoids playing with puppies even though the likelihood of it happening is slim. Since this heuristic draws from immediate and easy examples, it uses system 1 to evaluate our decisions. As we already know system 1 can lead to a lot of incorrect assessments in comparison to system 2.