Question

Objective 4 Compare the heuristics of representativeness and availability in estimating probabilities of outcomes in decision making under uncertainty and their relation to fast and frugal heuristics.

Answer 1

When faced with uncertainty while trying to make a decision, people often rely on a mental shortcut. A heuristic is a mental shortcut that allows an individual to make a decision.

The availability heuristic describes the mental shortcut in which someone estimates whether something is likely to occur or come into mind or such as events are easily remembered. The availability heuristic describes the mental shortcut where we make decisions based on emotional cues, familiar facts, and vivid images that leave an easily recalled impression in our minds. Statistically speaking, we will not die in an airplane crash, be eaten by a shark, or fall to our death. When we’re asked to think of how likely something is, we ignore the statistical probabilities.

On to representativeness. These decisions tend to be based on how similar an example is to something else. In this way, representativeness is basically stereotyping. While availability has more to do with memory of specific instances, representativeness has more to do with memory of a prototype, stereotype or average. The representativeness heuristic is just one type of mental shortcut that allows us to make decisions quickly in the face of uncertainty.

Decision makers often make snap judgments using fast-and-frugal decision rules called cognitive heuristics. Fast-and-frugal heuristics are useful in situations of uncertainty, while optimization is designed for situations or risk. These heuristics may all play a role in win-win situations.

These heuristics are highly economical and usually effective, but they lead to systematic and predictable errors. A better understanding of these heuristics and of the biases to which they lead could improve judgments and decisions in situations of uncertainty.