TD L13

  1. Process Accounts
    • descriptive theories explain that we choose A
    • process accounts explain how we get to A
  2. endowment effect
    • describes the fact that we value items we currently own more than items we don't currently own 
    • can be seen as the instance of the status quo bias
    • can be explained by loss aversion
  3. focusing on the foregone
    • buyers and sellers focus on different info when estimating prices
    • buyers: money (what can i do with this money)
    • sellers: tickets/experience  (this is a once in a lifetime opportunity)
  4. Query Theory: A Process Story
    • assuming that preferences are constructed
    • when faced with a decision, we ask ourselves a series of questions in order to assess our preferences
    • we ask the questions serially 
    • we naturally start with the option that is presented as the default or status quo
  5. Inhibition of Later Queries
    • the hints half of you had likely interfered with your ability to think of a wider range of answers
    • For a variety of reasons, we are unable to come up with more answers for our earlier questions (confirmation bias, retrieval-induced forgetting, cog dis, inhibition of later answers caused by first few )
  6. Query Theory
    • process theory that can help to explain the mental process that governs: temporal discounting
    • framing effects
    • endowment effect
    • default effect
  7. Default effect
    • when faced with a choice between two options, we stick with the default more often than we switch to the alternate
    • default: the thing we would get if we failed to specify that we want the other thing
  8. Thought order mediates the default effect
    thoughts about option A are more frequent, comes first 

    e.g. amount of time spent outside vs weather and violent crime rates
  9. Query Theory explain Endowment Effect
    • Endowment predicts:
    • order of thoughts
    • number of thoughts
    • choice/value 

    mediation: endowment, thoughts, choice/value. EE driven by thought order (thought mediates effect of endowment on valuation of an item)
  10. Query Theory: implications
    • influencing people's thoughts can change their choices
    • make people consider the opposite first 
    • natural thought order vs unnatural thought order
  11. eliminating the endowment effect for sellers
    • natural thought order: what's good about the mug? what's good about money?
    • unnatural thought order: what's good about money? what's good about mug?

    after manipulation: earlier/more thoughts about not owning = more likely to choose/place a higher value on money
  12. Endowment out of thin air
    • buyers: whats good about money, about mug
    • sellers: what's good about the mug, about money 

    • Assign Ps to one condition or the other
    • condition determines thoughts and price, without any actual endowment
  13. Decision Architecture
    • tailoring the presentation of a choice in such a way as to influence the decision
    • Default effect is example of decision architecture tool
  14. impatience causes problems
    • we want gains now and losses later
    • we leave money on the table
    • we put off solving expensive problems
  15. Solution: use the now effect
    • discounting is reduced if there is no now options
    • precommitments
  16. Solution 2: use framing
    • to encourage patience for gains, offer more gains and present it first
    • to get people to give up money now, make the present the default
Card Set
TD L13
thinking and decision making