Inside View Versus Outside View Irregularity Hypothesis Attribute Substitution

Transcription

1 Finish: Next: Next: Inside View Versus Outside View Irregularity Hypothesis Attribute Substitution Psychology 466: Judgment & Decision Making Instructor: John Miyamoto 10/24/2017: Lecture 05-1 Note: This Powerpoint presentation may contain macros that I wrote to help me create the slides. The macros aren t needed to view the slides. You can disable or delete the macros without any change to the presentation.

2 Outline Irregularity Hypothesis - People believe that random events are patternless. Inside view versus the outside view Attribute substitution Psych 466, Miyamoto, Aut '17 Representativeness Heuristic Has Two Aspects - Similarity & Irregularity 2

3 Representativeness Heuristic, Similarity & Irregularity Representativeness heuristic had two aspects: Similarity Hypothesis Irregularity Hypothesis (a.k.a. Misconceptions of Chance) After defining the irregularity hypothesis, I will give some examples of misconceptions of chance Independent, Stationary Model for Random Events Psych 466, Miyamoto, Aut '17 3

4 Independent, Stationary Model for Random Events Independent stationary model: Independent what happens in the past has no influence over what happens next. Stationary the probability of the event doesn't change over time. Examples: Chance of heads when flipping a coin is independent and stationary. Chance of rolling a "2" with a die is independent and stationary. Chance of rain on successive days is not independent (rain or dry on day 1 is correlated with rain or dry on day 2) and not stationary (chance of rain varies depending on the season). Subjective Perception of Event Clusters Psych 466, Miyamoto, Aut '17 4

5 Subjective Perception of Event Clusters People sometimes think that airplane crashes happen in clusters (bunched together in time). Vaught & Dawes tested whether airplane crashes happen in clusters. Best fitting model is independent and stationary. V&D's result does not deny the existence of clusters they deny that clusters are caused by karma, fate or some systematic cause like deteriorating quality control. Definition Gambler's Fallacy Psych 466, Miyamoto, Aut '17 5

6 Gambler's Fallacy Gambler's Fallacy: The chances in a random sequence get smaller or larger in response to a recent history of large or small outcomes. ( Supporting Evidence: People attempting to flip a coin mentally: Mental coin flips are too patternless; they have fewer patterns than real coin flips. Gambler's Fallacy in an Italian Lottery Psych 466, Miyamoto, Aut '17 6

7 Gambler's Fallacy in an Italian Lottery Italian National Lotto (weekly): You can bet on any digit from 1 to numbers are drawn at random in 10 different Italian cities. Between May 2003 to February 2005, the number 53 was NOT drawn in the Venice lottery (152 consecutive lotteries). Pr(No "53" in 100 draws) = (about 1 in 170). Pr(No "53" in 150 draws) = (about 1 in 2000) Frenzy of betting on "53" in the Venice lotto. Woman drowned herself; she left a note stating that she had lost her family's saving on "53. A man in Signa shot his wife and son before killing himself. Four deaths, other physical violence, and many personal bankruptcies attributed to "53" madness. Gambler's Fallacy in an Italian Lottery - Consequences Psych 466, Miyamoto, Aut '17 7

8 Gambler's Fallacy in an Italian Lottery (cont.) Total of 3.5 billion Euros (about 4.2 billion dollars) was bet on "53". $27.5 million was spent per month before the February appearance of "53." $806 million was spent in the month of January before the February appearance of "53." (Almost 30 times the average monthly betting on "53.") The eventual winner who bet on "53" got about $768 million. Hot Hand in Basketball Psych 466, Miyamoto, Aut '17 8

9 Hot Hand in Basketball (Gilovich, Vallone & Tversky) Independent & stationary (I&S) model for a player shooting baskets: Player has a constant p-chance of making a shot. This chance is the same for every shot in a sequence of shots. If a player gets a "hot hand," then he/she has a higher chance of making a basket when he/she is hot than when he/she is cold. The "hot hand" hypothesis implies that shooting baskets is not independent and stationary 91% of basketball fans (Stanford & Cornell games) believed that a player has a better chance of making a shot after making 2 or 3 than after missing 2 or 3. The illusion of a hot hand in basketball has been thoroughly researched. Most sports fans are prone to seeing the illusion, but if you have studied JDM, you don t have to believe in it. Psych 466, Miyamoto, Aut '17 Runs Test for "Hot Hand" (Non-Independent & Non-Stationary Distribution) 9

10 Analysis of Runs A run is a succession of H or a succession of misses. H H M H M M M H. 5 runs The Wald-Wolfowitz runs test is a test for stationarity (low p-value on the test means that stationarity is violated). Rejection of null hypothesis (p <.01) was found for 1 of 9 players (Daryl Dawkins), i.e., most players satisfy stationary. Analysis of shots grouped into four successive shots. Stationarity predicts the number of groups with 0 shots made, 1 shot made,..., 4 shots made. Stationarity predictions are supported for all players. Also found no evidence for game by game variation in the chance of making a shot. Remarkable: All teams have equally good defense? Conclusions re Hot Hand Psych 466, Miyamoto, Aut '17 10

11 Conclusion re the Hot Hand in Basketball Human intuition assumes that randomness looks even more random than real randomness. Therefore real randomness looks like there are non-random patterns in the data. We are prone to infer causal forces where none exist. In the case of the "hot hand", the inferred causal force is physical or psychological process that changes the probability of success on the next shot. Website devoted to research into sports streaks (Alan Reifman): Illusion of Control Psych 466, Miyamoto, Aut '17 11

12 Comments re Next Topic The illusion of control is the hypothesis that normal people perceive themselves to have control over success or failure in a task with random rewards even when they do not have any control. WARNING: There is current controversy whether the evidence for an illusion of control is based on improper use of statistics. Psych 466,, Miyamoto, Aut '17 Illusion of Control 12

13 Illusion of Control Ellen Langer demonstrated that people perceive themselves to have control over outcomes even when they have no control. Experiment varied contingency between subjects' responses and the probability of "winning." High contengency subjects' strategy had a big effect on chance of "winning" Low contingency subjects' strategy had a small effect on chance of "winning" No contingency - subjects' strategy had NO effect on chance of "winning" Subjects in ALL conditions reported that their strategies affected their chances of reward, i.e., they could do something to give themselves a better chance of reward. Illusion of control subjects in NO contingency condition still thought their strategies had some efficacy (improved their chances). Comment re Illusion of Control in a Simulated Computer Investments Psych 466, Miyamoto, Aut '17 13

14 Comments re Next Slide The next slide documents a finding that stock traders who are more influenced by the illusion of control have less success in their stock trading decisions. In other words, being prone to seeing patterns where they do not exist is correlated with making poor investment decisions. This makes sense because a person who easily sees patterns where they do not exist will be too quick to buy a stock that starts to rise in value or too quick to sell a stock that starts to fall in value. Psych 466,, Miyamoto, Aut '17 Illusion of Control in Simulated Stock Environment 14

15 Illusion of Control in Simulated Investments Fenton-O'Creevy, M., Nicholson, N., Sloane, E., & Willman, P. (2003). Trading on illusions: Unrealistic perceptions of control and trading performance. Journal of Occupational and Organizational Psychology, 76, Traders from four British investment banks played a computer game. Traders make fictional investments which may or may not influence the value of an investment index (measure of a stock's value). Computer program was rigged so that the value of the investment index was independent from the traders' actions. The traders reported that they were able to influence the investment index to varying degrees. (In reality, they had no influence.) Traders with the greater illusion of control earned less on the average than other traders in the investment game. Their managers rated them as being lower on risk management and analytical ability. Conclusions re Misperception of Randomness Psych 466, Miyamoto, Aut '17 15

16 Conclusions re the Perception of Randomness Human intuition assumes that randomness looks even more random than real randomness. Therefore real randomness looks like there are non-random patterns in the data. Therefore we are prone to infer causal forces where none exists. Inside View Versus Outside View Psych 466, Miyamoto, Aut '17 16

17 Psych 466, Miyamoto, Aut '17 Inside View vs Outside View in Planning Judgments 17 The Inside View and the Outside View "Inside View" and "Outside View": Two different ways to look at a decision or judgment problem. Inside View: Look closely at the particular case. What do you see that would guide you towards a prediction? Outside View: Place the particular case in the context of many other similar cases. What usually happens in this population of similar cases?

18 Psych 466, Miyamoto, Aut '17 Inside View vs Outside View in the Lawyer/Engineer Problem 18 Inside View vs Outside View in Planning Judgments Inside View: Think about your plans. What do you need to get this job done? How long will each component take? Extrapolate to the entire project. Outside View: Think about your past experience with projects that are similar in complexity. Do people complete these projects on time? What has caused delays in the past? Is the current project likely to be different from past experiences with similar projects?

19 Inside View of the Lawyer/Engineer Problem DESCRIPTION OF JACK: Jack is a 45-year-old man. He is married and has four children. He is generally conservative, careful, and ambitious. He shows no interest in political and social issues and spends most of his free time on his many hobbies which include home carpentry, sailing, and mathematical puzzles. High Base Rate Condition: Jack's description was drawn at random from a set of 70 engineers and 30 lawyers. Low Base Rate Condition: Jack's description was drawn at random from a set of 30 engineers and 70 lawyers. INSIDE VIEW OF LAWYER/ENGINEER PROBLEM: What do you know about Jack that would make you think that he is a lawyer or an engineer? Outside View of Lawyer/Engineer Problems (Left Side - High Base Rate Only) Psych 466, Miyamoto, Aut '17 19

20 Example: Outside View of the Lawyer/Engineer Problem High Base Rate Condition Low Base Rate Condition 30 Lawyers 70 Engineers 70 Lawyers 30 Engineers Sounds like Jack Sounds like Jack Sounds like Jack Sounds like Jack Low Base Rate Condition (Left Side Hidden) Psych 466, Miyamoto, Aut '17 20

21 Example: Outside View of the Lawyer/Engineer Problem High Base Rate Condition Low Base Rate Condition 30 Lawyers 70 Engineers 70 Lawyers 30 Engineers Sounds like Jack Sounds like Jack Sounds like Jack Sounds like Jack Show Both Sides of This Slide Psych 466, Miyamoto, Aut '17 21

22 Example: Outside View of the Lawyer/Engineer Problem High Base Rate Condition Low Base Rate Condition 30 Lawyers 70 Engineers 70 Lawyers 30 Engineers Sounds like Jack Sounds like Jack Sounds like Jack Sounds like Jack is higher. is lower. Why Does the Inside View Promote Base-Rate Neglect? Psych 466, Miyamoto, Aut '17 22

23 Why Does the Inside View Promote Base-Rate Neglect? Inside view focuses on information about the particular case. o Tom W Problem: Focus on what Tom is like,... on what computer scientists are like,... on what business majors are like,... on what social science students are like,... etc.. o Lawyer/Engineer Problem: Focus on what Jack is like. Focus on what engineers are like. Focus on what lawyers are like. Outside view interprets the current problem as one example of many similar problems. o How many different outcomes can this problem have? o How often do these different outcomes occur? Base-rate is not part of the inside view. It tends to get ignored. Psych 466, Miyamoto, Aut '17 Inside View and Outside View of Planning Problems 23

24 Conclusions re Inside View versus Outside View Both perspectives are useful and informative. Learn to switch back and forth between these two views. Both views have their strengths and weaknesses. Psych 466, Miyamoto, Aut '17 Introduction to Attribute Substition 24

25 Attribute Substitution in Probability Judgment Target attribute: Probability of an event, E.g., Will the U.S. have a large military presence in Afghanistan in 2020? Heuristic attribute: Easy-to-judge attribute that is related to the probability of the event. E.g., similarity to other political situations or availability of analogous political situations. A.k.a. the proxy attribute. Hypothesis that motivated Kahneman & Tversky s research: People substitute similarity or availability for probability. Similarity & availability System 1 Probability theory System 2 Psych 466, Miyamoto, Aut '17 When Does Attribute Substitution Occur? 25

26 When is Attribute Substitution Likely to Occur? (K&F) K&F: Attribute substitution is more likely when: 1. The target attribute is relatively inaccessible, i.e., hard to evaluate or unfamiliar; 2. A semantically and associatively related attribute is highly accessible (heuristic attribute); 3. The substitution of the heuristic attribute in the judgment is not rejected by critical operations of System 2. Note to JM: Explain System 1 and System 2 Psych 466, Miyamoto, Aut '17 Repeat Slide with Examples of Attribute Substitution 26

27 When is Attribute Substitution Likely to Occur? (K&F) K&F: Attribute substitution is more likely when: 1. the target attribute is relatively inaccessible, i.e., hard to evaluate or unfamiliar; 2. a semantically and associatively related attribute is highly accessible (heuristic attribute); 3. the substitution of the heuristic attribute in the judgment is not rejected by critical operations of System 2. Examples of common attribute substitutions: Substitution of similarity for probability (representativeness) Substitution of availability for probability (availability) Substitution of fluency for recollective memory processes Affective response for more cognitive evaluations like worth or virtue. Psych 466, Miyamoto, Aut '17 Recipe for Demonstrating Attribute Substitution: Method I 27

28 How to Demonstrate Occurrence of Attribute Substitution Method I Collect judgment data for the heuristic attribute and the target attribute. Show that judgments of the heuristic attribute are highly correlated with judgments of the target attribute. The demonstration is especially strong when there are other objective considerations that should reduce the correlation between the heuristic attribute and the target attribute. Tom W problem is an example of Method 1. Psych 466, Miyamoto, Aut '17 Tom W problems exemplifies this strategy 28

29 Tom W Problem - Results Correlation between judged base rate and probability rank = Correlation between similarity rank and probability rank = Psych 466, Miyamoto, Aut '17 Scatter Plots of the Data in this Table 29

30 Rank of Judged Probability Rank of Judged Probability Graph of Tom W Results Similarity versus Judged Probability Base Rate versus Judged Probability Similarity Rank Rank of Judged Base Rate Heuristic attribute (similarity) and target attribute (probability) are highly correlated (+.97). Rule-based System 2 requires attention to base rate. Subjects appear to disregard base rate (correlation = -.65). Psych 466, Miyamoto, Aut '17 How to Demonstrate Occurrence of Attribute Substitution: Method II 30

31 How to Demonstrate Occurrence of Attribute Substitution Method 2 Experimentally manipulate the strength of the heuristic attribute. Show that judgments of the target attribute are influenced in the predicted direction by variation of the heuristic attribute. Again, the demonstration is especially strong when there are other objective considerations that should reduce the correlation between the heuristic attribute and the target attribute. Manipulations of ease of recall exemplify Method 2. Ease of Recall & Availability Exemplifies this Method Psych 466, Miyamoto, Aut '17 31

32 Psych 466, Miyamoto, Aut '17 32 Summary of Attribute Substitution Example: Ease of Recall Affects Judgment Making it easy to remember examples where subject has been assertive makes subject think she is more assertive. Easier to recall 6 examples than 12 examples. Easier to recall examples when smiling than when frowning. Target attribute: Evaluation of how assertive you are. Heuristic attribute: Evaluation of how easy it is to recall the examples of being assertive. In this example, the experimenter manipulates the heuristic attribute (makes recall easier or harder for different subjects), and shows that the attribution (self-rating of assertiveness) increases in the predicted direction.

33 Summary Attribute substitution is a common form of heuristic reasoning. Attribute substitution = judging a target attribute in terms of a more accessible heuristic attribute. There can be more or less direct conflicts between heuristic reasoning and rule-governed or theory-governed reasoning. Heuristic reasoning is often context sensitive Different contexts may suggest different heuristics. Different contexts may produce different emphases on heuristic versus rule-governed reasoning. Heuristic reasoning is sometimes good and sometimes bad (for the person doing the reasoning). Psych 466, Miyamoto, Aut '17 Class discussion of attribute substitution 33

34 Class Discussion Can we generate examples of attribute substitution in everyday life? Example: Target Attribute: Will my relationship with XXX last? Heuristic Attribute: How well am I getting along with XXX? Example: Target Attribute: Will a career doing YYY be rewarding for me over the long run? Heuristic Attribute: How much fun do people have when doing YYY? Psych 466, Miyamoto, Aut '17 END 34