"Making Better Decisions -- Decision Theory in Practice"by Itzhak Gilboa
I. My overview
1. A perfect textbook for a course in management or economics. I fortunately have the author Professor Gilboa as our course instructor for "Behavioral Economics" -- Please win the Nobel Prize (he was already nominated) as soon as possible so that we shallow and vulgarian people can brag about once being your students. Hahahaha. (Btw I sincerely apologize for not coming to your class every now and then... (okayyyy not “every now andthen” but A LOT)
2. This book does not get into the nuts and bolts of the theory; it is rather a catalog of patterns of decision making that some theorists consider to be irrational. It is therefore constructed in this sense, as Gilboa believes that the best way to explain a principle is to start with an example that violates it.
3. I love the spirit that people make endless efforts to doubt the already existing or seemingly plausible axioms: "Give me an axiom, and I'll design the experiment that refutes it."--Amos Tversky
II. Some notes (from different sources) to the terms explained in the book
^Framing Effects 框架效应:
different representations of same info:
e.g. survival rate VS. death rate; get VS. lose ("lossaversion", "endowment effect")
Ways to be immune to the framing effects: brainstorming and formal models (avoid over-mathematization)
^Endowment Effect 禀赋效应:
the tendency to value what we have more than what we do not yet have (the status quo bias)
^Heuristic Bias
1) Representativeness Heuristic 代表性法则: assessing similarity of objects and organizing them based around the category prototype
Found a very good article with excellent examples online that made my life much easier:
e.g. Jane上周末参加了反对妇女歧视的游行,请问Jane更有可能是,1,一名护士,2,一名具有强烈女权主义者精神的护士。答案很明显,选项二是选项一的一个子集,可是实验的结果是大家都更倾向于选择答案二。
e.g. 赌徒效应(we tend to ignore the 50% probability)
2) Availability Heuristic 可得性法则:
Examples in the book:
In four pages of a novel (abt 2,000words) in English, do you expect to find more than 10 words that have the form "_ _ _ _ _ n _ " (seven-letter words that have the letter “n” in thesixth position)?
What if I change the question into: "_ _ _ _ ing" ?(seven-letter words that end with “ing”)?
-- higher estimation in the second but the first describes a larger set of words!
3) Anchoring Effect 锚定效应:
the effect that irrelevant (or nearly irrelevant) information might have, above and beyond what can be reasonably justified (source: from the book)
the tendency to attach or "anchor" our thoughts to a reference point - even though it may have no logical relevance to the decision at hand (source: from Investopedia)
^Mental Accounting 心理账户:
the tendency for people to separate their money into separate accounts based on a variety of subjective criteria (source: from Investopedia)
(I admit to have only finished 1/4 part of the book…)
III. For further reflection:
Some questions that I bear in mind throughout reading (yes I got distracted so easily...not the book's problem but mine)
^about uncertainty: How can uncertainty be quantified and dealt with?
^about game theory: How do people and institutions interact? Any solution concepts capable of providing predictions to this sort of interactivebehavior (and to what extent)?
^about social choice: Can our preferences be aggregated at all (simultaneously even?)?
^about rationality: What does this mean (and how has itevolved) in economics/philosophy/psychology?
IV. Part of my mind-mapping:
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