Cognitive Psychology, 2 nd Ed.

1. Cognitive Psychology, 2nd Ed. Chapter 14 Reasoning and Decision Making

2. Syllogistic Reasoning • Valid deductive conclusions necessarily follow from the premises. All A are B (All professors are birds) All B are C (All birds are aliens) All A are C (All professors are aliens)

3. Syllogistic Reasoning • Most syllogistic forms are invalid: All A are B Some B are C Some A are C? Not necessarily! No A are B No B are C No A are C? Not necessarily!

7. Cognitive Constraints • Working memory limits the number of alternatives considered. • Illicit conversion: misinterpreting “All A are B” to mean “All B are A.” • Belief bias: humans in diverse cultures accept conclusions as valid when they fit cultural beliefs.

8. Conditional Reasoning (If P, then Q) • Affirming the antecedent (P) • Denying the consequent (not Q) • Denying the antecedent (not P) • Affirming the consequent (Q)

11. Modus Tollens—Denying the Consequent • If a card has a vowel on one side, then it has an even number on the other side. 4% turn over the 7. • Catch the cheater in a social situation! beer-16, beer-21, soda-16, soda-21 If the person is drinking beer, then she is over 21. beer soda 21 16

12. Expected Utility Theory • Bet 1: Win $8 with odds 1/3 $8 X 1/3 = $2.67 Bet 2: Win $3 with odds of 5/6 $3 X 5/6 = $2.50 Expected utility greater for Bet 1, most people select Bet 2.

14. Subjective Utility Curve • Value (subjective utility) increases slowly for gains. • Implication: Further and further gains, don’t make people as happy as going from zero to a small gain.

15. Subjective Utility Curve • Value (subjective utility) decreases rapidly for losses but then begins to level out. • Implication: Initial losses are the most painful. Very heavy losses, on the other hand, are tolerated better than one might expect.

17. Stock Market Behavior • Buyer’s regret--reference point is often lowered right after purchasing a stock, increasing the perception of risk (paid $50, but now only think it’s worth $45—a small loss). • The buyer is risk averse and the small loss looks too large to keep the stock in the portfolio for long. Even a winning stock can look too risky to keep. • A losing stock, on the other hand, puts one into the risk tolerant region. Losers are held too long.

18. Estimating Probabilities • Overestimates of low frequency events (note: insurance premiums take into account this error). • Underestimates of high frequency events. (note: works against those engaged in risky behavior with high probability, negative consequences).

20. Representativeness Heuristic • Typical events of a category are seen as more probable (e.g., HTTHHT > HHHTTT). • Law of small numbers—mistakenly expect small samples to mirror population statistics and the Gambler’s Fallacy. • Conjunctive Fallacy: Pr (AB) > Pr (A)

22. Availability Heuristic • Events easily retrieved from memory must be highly probable. • Problem lies in factors that make events stand in memory (e.g., distinctiveness, emotional salience, frequency of encoding/retrieval).

24. Simulation Heuristic • Construction of a mental model that explains an event makes it seem probable. • Hindsight bias—”I knew it all along.”