01_P & B - Chapter 02

between "Risk as feelings" and " Risk as analysis"

Risk as feelings: Instinctive and intuitive reactions to danger (Intuitiv)

Risk as analysis: Logic, deliberate assessment of risks (logisch/bewusst)

Humans frequently assess risk as feelings, although they might (try to) convince
themselves and others that the assessment is based on analysis

(Risiken werden häufig als Gefühle eingestuft, auch Menschen überzeugt sein wollen, dass sie logisch und bewusst bewertet wurden)

Used while judging the risks and benefits of something, depending on the positive or
negative feelings related to the stimulus

Risks & Benefits

Positive feelings:

• risks are judged as low
• the benefits as high

Negative feelings:

• risks are judged as high
• benefits as low

likely under time pressure/constraints, i.e. when people's opportunity for analytic consideration is reduced and an efficient mode of judgment is needed

wenn die Menschen weniger Gelegenheit zum analytischen Nachdenken haben und eine effiziente Urteilsbildung erforderlich ist.

Information about benefit or risk could influence the affective evaluations (positive or negative) and lead to conclusions about risk and benefit that are affectively consistent with the information given

Note: people were only informed about the risk or only about the benefit -> hence,
they had no information on benefits or risks respectively. Instead they used the affect
heuristic to judge the benefits or risks (i.e. they were guided by their feelings)

people were only informed about the risk or only about the benefit hence,
they had no information on benefits or risks respectively. Instead they used the affect
heuristic to judge the benefits or risks (i.e. they were guided by their feelings)

die Menschen wurden nur über das Risiko oder nur über den Nutzen informiert -> sie hatten also keine Informationen über das jeweilige andere (Nutzen bzw. Risiken). Stattdessen nutzten sie die Affektheuristik, um die Vorteile oder Risiken zu beurteilen (d. h. sie ließen sich von ihren Gefühlen leiten).

• Evaluative judgments on one affective attribute (risk/benefit) can be influenced by experimentally manipulating information on another affective attribute (benefit/risk)
• Is consistent with the idea that people use the affect heuristic to make judgments about risk and benefit
• When the manipulation worked (i.e., when information increased perceived risk or benefit), the expected affectively congruent but inverse effect was found on the nonmanipulated attribute (i.e., perceived benefit or risk decreased)
• This provides evidence that the inverse relationship between perceived risk and perceived benefit found in Study 1 is causally determined

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• Urteile über Risiko/Nutzen können durch Manipulation von Informationen über das jeweils andere affektives Attribut (Nutzen/Risiko) beeinflusst werden.
• Menschen nutzen die Affektheuristik nutzen, um Urteile über Risiko und Nutzen zu fällen 
• Wenn die Manipulation funktionierte (erhöhung wahrgenommenes Risiko oder Nutzen), wurde der umgekehrte Effekt auf das nicht manipulierte Attribut gefunden (d. h., der wahrgenommene Nutzen oder das Risiko nahm ab) 
• Dies ist ein Beweis dafür, dass die in Studie 1 festgestellte inverse (umgekehrte) Beziehung zwischen wahrgenommenem Risiko und wahrgenommenem Nutzen kausal (ursächlich)  bedingt ist.

(Kausal: auf dem Verhältnis zwischen Ursache und Wirkung beruhend)

People overestimate the degree to which their future tastes will resemble their
current tastes, hence their current state plays “too large” a role in their decisions

people attempt to come up with an unbiased estimateof what their affective state will be in the future, but their assessment is contaminated by unique influences of their current well-known affective state

e.g. planning and saving for the retirement -> people may have a higher consumtion in the future than today -> protection bias

go to the supermarket if you are hungry -> you buy to much things, because you think thank you are that hungry in the next days

People under-appreciate their habit formation -> this may lead to projection bias in planning for the future, such as retirement savings

If people make combined choices of quantities of goods for future consumption, they choose more variety than if they make separate choices immediately preceding consumption

Streuungsverzerrung (diversification bias) beschreibt das Verhalten, dass Menschen bei einer sofortigen Entscheidung mehrere verschiedene Optionen wählen und bei einer sequenziellen, also nacheinander stattfindenden, Entscheidung jeweils andere Optionen wählen würden. Diese Art der Verzerrung kommt im Alltag relativ häufig vor. 

z.B. Sammeleinkauf für Ferien mit Schokoladensorten (man nimmt gar nicht nur die Favoriten sondern auch andere, da man keine Möglichkeit verlieren will) ,

dasselbe für Anleger bei Fondsinvestitionen 

Time contraction:
Tendency to compress long time periods as if they were short (Beispiel Essensgewohnheiten -> overpredicted their degree of satiation / Menschen mögen Gewohnheiten mehr als sie denken. Müsli & Jogurth am 1. Tag vorhersage, dass es am 7. nicht mehr gleich gemocht wird -> jedoch wird es am 7. Tag sogar noch mehr gemocht)

Choice bracketing (Auswahl in Klammern):
Tendency to treat choices in another situation the same way. Connected (zusammenhängend) options will be treadet the same as some they are seperated from each other

-> Simultaneous choices (a package of choice options)
typical choice is to choose a diversification (Streuung) bsp. Investitionen in verschiedene Fonds auch solche die man sonst gar nicht präferiert hätte

-> Sequential choices (one choice)
typical choice (heuristics) is to choose the moste preferred option

Favoring current option (status quo) to avoid losses and to avoid regret and/or lost cost that might occur (auftreten) when changing the current situation (status quo)

-> E.g., people are much more likely to stick with existing policies, consumption
bundles, legislations, and so on even when the costs of switching are very low (good example are insurances)

• Loss aversion
• regret aversion
• procrastination
• sunk cost fallacy

Tendency to assess losses more negatively than gains positively -> potential losses of the change are overweighed

Reason: The subjective pain of loss is higher than the subjective utility of a gain of the same absolute amount

> Losing 500 CHF is a higher subjective pain than the subjective utility of winning 500 CHF

actions that lead to poor results cause stronger regret in people than actions not taken which would have lead to poor results

Subjects are reluctant to vaccinate a (hypothetical) child when the vaccination itself
can cause death, even when this is much less likely than death from the disease
prevente

Omission/commission bias (Unterlassungsfehler):
Tendency to care much more about errors of commission than errors of omission, even when there is no obvious normative reason to draw a distinction -> Intuition that harmful commissions are worse than otherwise equivalent omissions is therefore a self-serving one

e.g. Subjects are reluctant to vaccinate a (hypothetical) child when the vaccination itself
can cause death, even when this is much less likely than death from the disease
prevented

weiterführende Investitionen, wenn Bereits Kosten, Zeit und Aufwand angefallen sind -> Wunsch nicht verschwenderisch zu wirken

Already accrued costs (money, effort, time) are considered in decision making

-> Continued investment to avoid wasting already accrued costs even though decision cannot be justified anymore and further investment will not create any benefit in the long run

Psychological justification: Desire not to appear wasteful

e.g. Theater example -> customers who paid more for a season ticket, attend the plays more those who paid less -> because of their sunk costs

Tendency to repeatedly delay taking beneficial actions based on a mistaken belief that one will take these actions in the future

e.g. Person has some money she would like to invest; just hasn’t done it yet

Countermeasures:

• Set deadlines, e.g., for finacial transcations
• Calculate the cost about missing out options

when we own something we focus on what we would give up rather than what we could gain

DE: Besitztumseffekt, beschreibt, wie Menschen den Wert ihres eigenen Besitztums einschätzen. Der Effekt sorgt dafür, dass wir den Wert eines Gutes (beispielsweise einer gekauften Ware) einfach nur dadurch höher einschätzen, weil wir dieses Gut (temporär) besitzen

When an object or resource is less readily available (e.g., due to limited quantity or time), we tend to perceive it as more valuable

Explenation: 

• Individuals desire to preserve freedom of choice: idea of a potential loss of that freedom as items become less available influences decision
• People who have processed all relevant product information and are on the brink of
  their buying decision, are strongly affected by scarcity information and thus tend to
  buy the scarce product (e.g. there are just one room left)

-> Using scarcity information signaling high demand does not work well ("in high demand" -> booking.com"

it is differentiated in "quanity" or "in time" -> please see the attached picture

a good that:

• Fulfills social need for uniqueness
• Social esteem: Possession as a status symbol
• depends on value system

People’s subjective confidence in their own ability and in their own judgment is greater than their objective (actual) performance

Overestimation of one’s actual performance:
thinking that you are better than you are

Overplacement of one’s performance relative to others:
exaggerated belief that you are better than others

Overprecision:
excessive confidence in the precision of one’s knowledge

thinking that you are better than you are

Distinction between:

• Skill situations:
  causal link between behavior and outcome; hence, success in skill tasks is controllable
• Luck situations:
  outcome is a fortuitous happening; hence, success in luck activities is uncontrollable

Observation: People acknowledge the concept of chance but still behave as though chance events can (at least partially) be controlled -> Illusion of control

exaggerated (übetrieben) belief that you are better than others

• Particularly prevalent when it is related to easier domains, such as driving a car or
  getting along with others (most believe to be above-average drivers)
• One reason is self-enhancement: preference for a positive self-view

the excessive faith that you know the truth

• Participants answer general knowledge test questions
• They are then asked to rate how confident they are in their answers on a scale
• Overconfidence is measured by calculating the score for a person’s average confidence rating relative to the actual proportion of questions answered correctly

• Describes perceivers’ tendency to underestimate the impact of situational factors on human behavior and to overestimate the impact of dispositional factors
• E.g., people often tend to believe that aggressive behavior is caused by aggressive personality characteristics (dispositional factor) even though aggressive)

-> Driving example -> we drive fast, it is okay because we are late / others speed fast, they are reckless and different than we are

correspondence bias:

People tend to infer stable personality characteristics from observed behavior even when this behavior could also be due to situational factors / DE: Menschen neigen dazu, von beobachteten Verhaltensweisen auf stabile Persönlichkeitsmerkmale zu schließen, selbst wenn diese Verhaltensweisen auch auf situative Faktoren zurückzuführen sein könnten

-> is the tendency to draw inferences about a person's unique and enduring dispositions (personality) from behaviors that can be entirely explained by the situations in which they occur; the influence of situational factors is ignored or underestimated

Example: someone is nervous in a room (because the needs to present something in a few minutes) but a fellow student think this is an anxious person, because of his behavior