Descriptive Models of Decision Making Quiz: Test Your Knowledge

📚 Quick Study Guide

• 🧠 Bounded Rationality: 🌍 Humans make decisions with limited information and cognitive resources, rather than perfectly rational choices.
• 🧭 Satisficing: ✅ Choosing the first option that meets a minimum acceptable standard, rather than searching for the optimal solution.
• ⚖️ Heuristics: 💡 Mental shortcuts used to simplify decision-making, which can lead to biases.
  • ⚓ Availability Heuristic: Estimating the likelihood of events based on how easily examples come to mind.
  • 📊 Representativeness Heuristic: Judging the probability of an event based on how similar it is to a prototype or stereotype.
  • 🧮 Anchoring and Adjustment Heuristic: Relying too heavily on an initial piece of information ('the anchor') when making decisions.
• 😥 Loss Aversion: 📉 The tendency to prefer avoiding losses to acquiring equivalent gains.
• 🖼️ Framing Effects: 🎭 How information is presented (framed) can influence decisions, even if the underlying options are the same.
• ⏳ Prospect Theory: A behavioral economic theory that describes how people make choices between risky alternatives. It posits that people evaluate gains and losses differently, placing more weight on potential losses than potential gains.

Practice Quiz

1. Which concept suggests that individuals make decisions using limited information and cognitive resources?
   1. A. Rational Choice Theory
   2. B. Bounded Rationality
   3. C. Expected Utility Theory
   4. D. Perfect Rationality
2. What is 'satisficing' in decision-making?
   1. A. Choosing the option with the highest expected value.
   2. B. Selecting the first option that meets a minimum acceptable standard.
   3. C. Maximizing potential gains while minimizing risk.
   4. D. Making perfectly rational decisions.
3. Which heuristic involves estimating the likelihood of events based on their mental availability?
   1. A. Representativeness Heuristic
   2. B. Anchoring and Adjustment Heuristic
   3. C. Availability Heuristic
   4. D. Confirmation Bias
4. What does 'loss aversion' refer to?
   1. A. The tendency to prefer acquiring gains to avoiding losses.
   2. B. The tendency to prefer avoiding losses to acquiring equivalent gains.
   3. C. Neutrality towards gains and losses.
   4. D. Seeking out situations with potential losses.
5. How do 'framing effects' influence decision-making?
   1. A. By ensuring decisions are always rational.
   2. B. By eliminating biases.
   3. C. By influencing decisions based on how information is presented.
   4. D. They have no effect on decision making.
6. Which heuristic involves relying too heavily on an initial piece of information when making decisions?
   1. A. Availability Heuristic
   2. B. Representativeness Heuristic
   3. C. Anchoring and Adjustment Heuristic
   4. D. Confirmation Bias
7. What does Prospect Theory suggest about how people evaluate gains and losses?
   1. A. People evaluate gains and losses equally.
   2. B. People place more weight on potential gains than potential losses.
   3. C. People place more weight on potential losses than potential gains.
   4. D. People ignore both gains and losses when making decisions.