• Gretchen Chapman
• Fall 2006
• Fridays 9:30 - 12:10 pm
• Room 301, Psychology Building
16:830:534:01 Psychology of Decision Making (3 credits)

Course Description:  How are decisions actually made and how do these processes differ from the best or optimal methods for decision making? This course will contrast normative and descriptive theories of reasoning, judgment, and decision making. We will explore judgments of risk and uncertainty, including research on calibration, hypothesis testing, and heuristics and biases. An analysis of decision making will include a comparison of expected utility theory with the psychological model Prospect Theory. Other topics include preference reversals, affect and decision making, self control, game theory, and moral decisions. Many of the examples and applications will come from health and medicine; other areas of application include business, law, and public policy.
 
 

Jump to Class [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13]

Readings: Designated as Chapter (from course book) or Article

• Course book: Available in the campusbookstore:   Koehler, D.J. & Harvey, N.. (Eds.) (2004). Blackwell Handbook of Judgment and Decision Making.  New York:  Blackwell Publishing.
• Additional Articles: are in room 205 of the Psychology Building in the lateral files to the left as you enter. Please remove them only long enough to make copies for yourself. Some articles are available on-line (see below).

• Office: Room 215, Psychology Building
• Mailbox: Room 205, Psychology Building
• Phone: (732) 445-2640
• Fax: (732) 445-2263
• e-mail: gbc at rci.rutgers.edu
• web page: http://www.rci.rutgers.edu/~gbc

• 1. Act as resource person for one of the 12 sessions. This involves doing the readings especially carefully, and being prepared to answer questions about them or summarize points.
• 2. Three homework assignments (problem sets) listed in the syllabus.
• 3. Three take-home essays. These will be handed out on three dates during the course and are due two weeks later.
• As a substitute for any one of these essays, you can attend a decision making talk and write a summary and critical review. Relevant talk schedules at Rutgers, Princeton, and Penn will be circulated in class.
• Ellen Peters talks at Rutgers on Tues Sept. 19, 1:00 pm, room 101, Psychology Bldg, Busch Campus

• Take-home essays (3): 25% each
• Resource person session and overall class participation: 10%
• Homework assignments (3): 5% each

• Distinguish among normative and descriptive theories.  What makes a theory normative?
• What is utility?

9/15/06Class #2. Heuristics & biases  (47 pp) (resource person: ______________)

Article	Tversky, A. & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases.  Science, 185, 1124-1131.	8
Chapter 5	Keren, G. & Teigen, K. (2004).  Yet another look at the heuristics and biases approach.	21
Chapter 12	Epley, N. (2004).  A tale of tuned decks?  Anchoring as accessibility and anchoring as adjustment.	18

Questions to think about while reading:

• Characterize the heuristics and biases research tradition. What counts as a heuristic and what counts as a bias?
• What causes the anchoring bias?  How does current understanding differ from Tversky & Kahneman's original characterization?

9/22/06 Class #3.  Probability, calibration, & overconfidence (63 pp)  (resource person:  ___________)

Chapter 8	Lagnado, D.A. & Sloman, S.A. (2004).  Inside and outside probability judgment.	19
Chapter 9	Griffin, D. & Brenner, L. (2004).  Perspectives on probability judgment calibration.	24
Article	Brewer, N. & Wells, G.L. (2006). The confidence-accuracy relationship in eyewitness identification: Effects of lineup instructions, foil similarity, and target-absent base rates. Journal of Experimental Psychology: Applied, 12(1), 11-30.	20

Homework #1 handed out (calibration and Bayes' Theorem)

Questions to think about while reading:

• What is probability? What distinguishes inside and outside models of probability?
• What are calibration, discrimination, and probability score? How is a calibration plot made?

9/29/05 Class #4. Bayes' Theorem & hypothesis testing (58 pp) (resource person: ____________)

Article	Dawson-Saunders, B. & Trapp, R.G. (1990). Basic and Clinical Biostatistics. Norwalk, CT: Appleton & Lange. Chapter 13: Evaluation diagnostic procedures.	16
Article	Klayman, J. and Ha, Y-W. (1987). Confirmation, disconfirmation, and information in hypothesis testing. Psychological Review, 94, 211-228.	18
Chapter 10	McKenzie, C.R.M. (2004.)  Hypothesis testing and evaluation.	19
Article	Bramwell, R., West, H., & Salmon, P. (2006). Health professionals' and service users' interpretation of screening test results: Experimental study. British Medical Journal, 333, 284-289.	5

Homework #1 due

Questions to think about while reading:

• Explain the normative theory for hypothesis testing (Bayes' theorem) including the role of prior probability, sensitivity (hit rate), and specificity (1-false alarm rate). How does a new piece of evidence update the probability of a hypothesis?
• In what ways do people violate this normative theory? List some biases in hypothesis testing.
• Some phenomena that might appear to be biases in hypothesis testing are actually normative given certain reasonable assumptions.  Discuss.

Essay #1 handed out

Questions to think about while reading:

• Characterize system 1 and system 2?
• How is the idea of attribute substitution like and dislike older characterizations of heuristics and biases?
• What causes the hindsight bias?
• What biases to people make when judging covariation?

 

10/13/06 Class #6. Normative Utility Theory  (88 pp) (resource person: __________)

Article	Baron, J. (2000). Thinking and Deciding 3rd Ed. New York: Cambridge University Press. Chapters 10 & 14	41
Article	Roberts, M.S. & Sonnenberg, F.A. (2000). Decision modeling techniques. In G.B. Chapman & F. Sonnenberg (Eds.) Decision Making in Health Care:  Theory, Psychology, and Applications.  New York:  Cambridge University Press, 20-64.	45

Homework #2 handed out (decision trees and tables)

Questions to think about while reading:

• Why is expected utility theory (EUT) the normative theory of decisions under uncertainty?
• Explain how to construct a decision tree, including choice nodes, chance nodes, and folding back.
• Why is the shape of a utility function important, and what are some ways to assess the utility function?
• Why is multi-attribute utility theory the normative theory for decisions with multiple goals? How does it differ from EUT?

Essay #1 & Homework #2 due

Questions to think about while reading:

• Explain how prospect theory (PT) is a variation on EUT, including the value function and the pi function.
• List a few decision making phenomena that violate EUT but can be explained by PT. Specify what aspect of PT explains them (e.g., loss aversion, S-shaped value function, probability weighting.)

10/27/06 Class #8.  Affect and Decision Making (60 pp) (resource people: Nicole DiDonato & Lyra Stein )

Chapter 22	Rottenstreich, Y. & Shu, S. (2004).  The connection between affect and decision making:  Nine resulting phenomena.	20
Article	Gilbert, D.T. & Wilson, T.D. (2000). Miswanting: Some problems in the forecasting of future affective states. In J.P. Forgas (Ed.) Feeling and thinking: The role of affect in social cognition. Studies in emotion and social interaction, 2nd series. New York: Cambridge University Press, pp. 178-197.	20
Article	Lerner, J.S., Gonzalez, R.M., Small, D.A., & Fischhoff, B.(2003).  Effects of fear and anger on perceived risk of terrorism. Psychological Science, 14, 144-150.	7
Article	Lerner, J.S., Small, D.A., & Loewenstein, G. (2004). Heart strings and purse strings: Carryover effects of emotions on economic decisions. Psychological Science, 15, 337-341.	5
Article	Loewenstein, G. (2005). Hot-cold empathy gaps and medical decision making.   Health Psychology, 24, S49-S56.	8

Questions to think about while reading:

• How does appraisal tendency theory explain the role of emotions in decision making?
• What's the difference between predicted and experienced utility? What biases to people make in predicting their preferences for future events?

Essay #2 handed out

Questions to think about while reading:

• What psychological mechanisms might explain preference reversals, and what data support these account?
• What other biases occur in multi-attribute trade-offs and how might reason-based choice account for them?

11/10/06 Class #10. intertemporal choice (__ pp) (resource person: __________)

Chapter 21	Read, D. (2004).  Intertemporal Choice.	20
Article	Mischel, W., Ayduk, O., & Mendoza-Denton, R. (2003).  Sustaining delay of gratification over time:  A hot-cool system perspective. In George Loewenstein, Daniel Read, & Roy Baumeister (Eds.) Time and Decision: Economic & Psychology Perspectives on Intertemporal Choice.  New York: Russell Sage Foundation, pp.
Article	McClure, S.M. et al. (2004).  Seperate neural systems value immediate and delayed monetary rewards.  Science, 306, 503-507.	5
Article	Chapman, G.B. (2005).  Short-term cost for long-term benefit: Time preference and cancer control. Health Psychology, 24, S41-S48.	8

Questions to think about while reading:

• What is the normative theory for intertemporal choice? What is a discount rate, and why should the same rate be used for all decisions?
• In what ways does intertemporal choice violate the normative theory?

Nov. 17: No Class (J/DM)

Wed. 11/22/06 Class #11. Behavioral game theory and cooperation (62 pp) (resource person: ___________)

Article	Rasmusen, R. (1989). Games and information: An Introduction to Game Theory. Cambridge, Mass.: Basil Blackwell. Chapter 1.	21
Chapter 24	Gachter, S. (2004).  Behavioral game theory.	19
Article	Camerer, C.F. &  Fehr, E. (2006). When does "economic man" dominate social behavior? Science, 311(5757), 47-52.	6
Article	Hasselhuhn, M.P. & Mellers, B.A. (2005.) Emotions and cooperation in economic games. Cognitive Brain Research. Vol 23(1) Apr 2005, 24-33.	10
Article	Dawes, R.M. & Messick, D.M. (2000). Social dilemmas. International Journal of Psychology. Vol 35(2), 111-116.	6

Homework #3 handed out (game theory). Essay #2 due.

Questions to think about while reading:

• Describe game theory as a normative theory of group decision making. What role does it posit for expectations about the behavior of one's opponent?
• In what ways do decision makers violate game theory? In what ways do they outperform it?
• What is the game theoretic solution to a social dilemma? Why do people cooperate in social dilemmas? Why do they defect?

 

Homework #3 due

Questions to think about while reading:

• How are perceptions of fairness rational or irrational? To what extent can perceptions of fairness be explained in terms of other decision phenomena (e.g., reference point effects)?
• Why are people swayed by self interest?
• What decision heuristics result in poor moral judgment?

Essay #3 handed out

Questions to think about while reading:

• How would you define rationality?  What is ecological rationality?
• How can decision making be improved? In what ways does it need to be improved?
• What implications does neuroeconomics research have for the debate over whether people are rational or irrational?

All late assignments due (to avoid an incomplete)

Syllabus from 1997
Syllabus from 2000
Syllabus from 2002

last updated 8/08/06