Week 5 Reflective report - Decision under risk and uncertainty

The Neuroscience of Valuation 

Research has shown that the brain can represent losses compared to gains. Research within the neuroscience of valuation literature studies on primates has found that neurons play a crucial role in valuation of rewards (dopamine neurone).

MRI scans have found this link to be true. Generally research has found that despite odds remaining the same but wagers changing, individuals would take less risk as the stakes became greater; as this happens the MRI scan revealed that individuals brain reward centre quickly deactivated.  This led researchers to believe that as humans we are not just behaviourally sensitive to loss and gain but also our brains are just as sensitive.

http://www.youtube.com/watch?v=21BnFTLTeXc&feature=related

Week 6 Reflective report - Psychological theories

Prospect theory

Kanehman and Tversky an analysis of decision under risk 1986 paper criticised The expected utlity theory; arguing that individuals do not always incorporate thier outcomes with exisitng assets. Kanehman and Tversky demonstarted this in a phenomenon they called the isolation effect. Kanhaman and Tversky found that the nature reference point in which individuals use to determine an outcome as a loss or gain can be influenced by the way a discription of a problem is framed.

Week 2 Reflective report

A Basic History to Models of Rational Inference

The Laplacean Demon was arguably the foundation for many models of rational inference in the early 20^th century, and influence individuals such as George Boole to Jean Piaget. The classical view at the time was that the law of human inference are laws of probability and statistics. Individuals who held this view supported the notion that the human brain/ mind had an unlimited capacity, knowledge and time to make rational inferences in a given situation.

This stance was confronted by individuals such as Goldstein and Gigerenzer; Tversky and Kahneman. Many researcher argued that in a real life situation the notion that an individual has access to an unlimited capacity and knowledge with no boundary of time was highly unrealistic; furthermore Goldstein and Gigerenzer (1996) argued that within a real life situation there are constraints both internal (human knowledge) and external (time) when an individual has to make a rational inference. Tversky and Kahneman went one step further by proposing that human inference is systematically biased and error prone due to these constraints.

Week 4 Reflective report

Fast and Frugal Heuristics

Fast & Frugal heuristics is a term used to describe the type of judgements mad by an individual who employs heuristics or shortcuts in decision making.

There are a wide range of heuristics which research within the literature argues individuals employ when making judgements i.e. recognition, take the best, take the last and minimlaising heuristics to name 4 of many more. Research in particular such as Goldstein and Gigerenzer (1996) has shown individuals under certain conditions employ differing heuristics. For example a more recent study conducted by Goldstein and Gigerenzer (2002) showed that recognition heuristic was employed when a group of American students were presented with a list of pairs of German cities and asked to decide which city out of the pair had the larger population. This study revealed that individuals used cues to make rational inferences based on a limited knowledge of the city.