day 2 lecture (1 slide per page)(1)
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dTRANSCRIPT
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Day 2 Lecture
The Psychology of Nego5a5ons and Decision Making
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Gas Station Game
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Results from Gas Sta5on Game
Distribu5on of Final Values
Average value for teams that competed rst
Average value of teams that cooperated rst
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Key Points
Interdependence creates fundamental dilemmas of trust
Implicit assump5ons drive behaviour
Ra5onal decision making is extremely dicult
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Prisoners Dilemma
S/he Keeps Quiet
S/he confesses
I keep Quiet We each get 2 years
S/he goes free; I get 10 years
I Confess I go free; S/he gets 10 years
We each get 8 years
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Prisoners Dilemma Invented in the 1950s
Major problem: rational solution is to cheat
This game is common in business! Personal lives as well
Why do we cooperate rather than cheat?
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Repeated Games Each player has an opportunity to "punish"
Cooperation can then be an equilibrium outcome
Incentive to cheat halted by threat of punishment
Reputations of the players?
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Dilemma Strategy: Tit-for-Tat
Academics were invited to send strategies Winning strategy by social psychologist Rappoport
Description of Tit-For-Tat On the first turn, always cooperate Then choose opponents last move as your next move
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Key Points of TFT
Nice Cooperates on the first move
Regulatory Punishes defection with defection
Forgiving Returns to cooperation if opponent does as well
Clear Opponent can always guess the next move
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Other Strategies
Tit for two tat If the opponent defects twice, then defect
Suspicious tit for tat Defect first move, then tit for tat
All defect All cooperate
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Communication Strategies
Communication impacts our outcomes Threats/promises can induce cooperation Threats are effective as long as they dont
have to be used
Both require repeated engagements
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Why did you decide?
Rational Decision-Making Define the problem Identify the criteria Weight the criteria Generate the alternatives Rate each alternative on each criterion Compute the optimal decision
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But this isnt how things work is it?
Do you MAXIMISE?
Or
Do you SATISFICE?
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Why did you decide?
Prior experiences and beliefs Its a Jungle Out There!! Vs People are nice
Processing of informa5on Predica5ons APribu5ons
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Ra5onal Decision Making is Hard
ORen what appears to you to be a ra5onal decision is in fact heavily biased.
Biased by how we process and remember informa5on
Biased by how we FEEL while we are making a decision
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What You See is All there Is (WYSIATI)
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Cogni5on
System 2: Controlled (involves conscious aPen5on) Who we think we are
System 1: Automa5c (non-conscious) Who we mostly are
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Automa5c vs. Controlled Processing
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Some things to consider
We need System 2 to follow rules, compare objects on mul5ple aPributes (while they sit in working memory), and
make deliberate choices
Using System 2 is hard and has very limited capacity, so it is VERY lazy
System 2 becomes depleted by concentra5ng or exercising self-control
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So
System 1 underlies most of our experience with the world and the decisions we make
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Gestalt Heuris5cs of Percep5on
We use cues to make inferences:
Con5nuity
Similarity
Closure
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Seeing 3D
The re5na is 2 dimensional We use distance/depth heuris5cs
Can lead to bias in percep5on Op5cal illusions
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Linear Perspec5ve
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Explains The Moon Illusion
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Leads to Physically Impossible Objects
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Even Gives Cues to Mo5on
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Leads to Bias in Your Percep5on of Life
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The Point
Heuris5cs underlie our func5oning
Provide a basis for complex func5oning
They are natural, and give us extraordinary capabili5es
But beware! - There are systema5c ways in which we are biased
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Key Point
APen5on is VERY LIMITED
Controlled thinking is very hard and becomes depleted quickly
We are naturally inclined to use whatever informa5on is available even if it is irrelevant
We are mostly unaware when this is happening
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WYSIATI Problems
Reliance on System 1 systema5cally biases our judgment
Can cause us to act irra5onally, decisions before and during nego5a5ons, and fail to correct mistakes Judges example!
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Major Biasing Factors
Bad is stronger than good Nega5vity Bias Loss aversion
Easy is bePer than hard Availability bias Conrma5on bias
You and I are dierent Fundamental APribu5on Error
Emo5ons and moods are informa5ve
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Bad is stronger than good
Confers and evolu5onary advantage!!
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Bad is stronger than good
Bad emo5ons have a stronger intensity than good emo5ons
Bad impressions and bad stereotypes are quicker to form and more resistant to disconrma5on
Bad feedback is remembered for longer and with greater accuracy
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Bad is stronger than good
GoPmans ra5o:
You need at least 5 posi5ve interac5ons for every 1 nega5ve interac5ons to have a successful long term rela5onship
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Loss Aversion
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Framing of Risk Imagine that Australia is preparing for the outbreak of an unusual
Asian disease that is expected to kill 600 people. Two alterna5ve programs to combat the disease have been proposed. Assume that the exact scien5c es5mates of the consequences of the programs are as follows. Please choose the program that you think is best.
You were given one of these two sets of choices: A: 200 people are saved: 60% B: 1/3 prob that 600 are saved, 2/3 prob that no one saved: 40%
A: 400 people will die: 20% B: 1/3 prob that no one will die, 2/3 prob that everyone dies: 80%
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Loss Aversion has Strong Eects on Nego5ators
Status quo bias
Endowment Eect
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Loss Aversion
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Easy is bePer than Hard The easier something is to think about, the more likely you will think it is: True Common
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Please rank order the following causes of death in the United States between 1990 and 2000, placing a 1 next to the most common cause, 2 next to the second most common cause, etc.
_____ Tobacco _____ Poor diet and physical inac5vity ____ Motor vehicle accidents ____ Firearms (guns) ____ Illicit drug use
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Which Kills more People? When you look at the numbersthe dierence is huge!
435,000 Tobacco 400,000 Poor diet and physical inac5vity 43,000 Motor vehicle accidents 29,000 Firearms (guns) 17,000 Illicit drug use Ease of recall biases responses
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What makes things easy to think about?
If we can easily think of examples
If it is emo5onally charged
If it is something we already think or believe
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Availability
The easier it is to consider instances of class Y, the more frequent we think it is
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Conrma5on Bias
We search for informa5on that supports/conrms our preconcep5ons, and disregard informa5on that challenges it
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Self-Serving Bias You ask your friend to run an urgent errand to pick something up for you at a shop in Melbourne Central. She takes your car and gets a parking 5cket while picking up the item. Should she pay for the 5cket? %100 said YES
OR Your friend asks you to run an urgent errand to pick something up for her at a shop in Melbourne Central. You take her car and get a parking 5cket while picking up the item. Should you pay for the 5cket? %75 said YES
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How does Cogni5ve Ease Inuence Nego5a5ons
Conrming informa5on you already believe and discoun5ng informa5on that disagrees.
Using tac5cs that have worked well in the past but are not appropriate
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Attribution Theory
Attribution is the process of perceiving causes for actions and outcomes
Dispositional attributions for success (me) Good skill, preparation, intelligence
Situational attributions for failures (other stuff)
Bad luck, other person cheated, no power
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Who was at fault in the exercise?
You? Why?
The other party? Why?
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Attribution Biases
For ourselves: Self-Serving Bias Attribute OWN success to DISPOSITION Attribute OWN failure to SITUATION
For others: The Fundamental Attribution Error (FAE) Underestimate the influence of SITUATIONS Overestimate the influence of DISPOSITION
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Emo5ons and moods are a good source of informa5on
Aect inuences the content of cogni5on Directly via memory/recall By ac5ng as informa5on
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Feelings as Informa5on
Our feelings color whatever is on our mind
Aboutness principle We assume whats on our mind is a cause But moods last longer than their causes!
Bridge study ARer walking over a high bridge, men more were confronted by a female experimenter
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Bridge Study
Bridge study ARer walking over a high bridge, men were confronted by a female experimenter
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How you feel as informa5on First set of respondents:
How happy are you these days? How much 5me have you spent with your close friends in the last month?
Correla0on = .01 First set of respondents:
How much 5me have you spent with your close friends in the last month?
How happy are you these days? Correla0on = .50
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Mood as info about Environment
Moods indicate info about environment Posi5ve mood its great, so GO ahead Nega5ve mood its bad, STOP and look
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Posi5ve Emo5ons
Broaden and Build (Fredrickson, 2000)
Top-down processing enhanced Think more rapidly and with less precision Make decisions more quickly Use less informa5on More condent in decisions
Benets Prompts openness, crea5vity, explora5on
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Nega5ve Emo5ons Ac5on Specic
BoPom-up processing enhanced More cri5cal thinking Longer, more elaborate processing strategies Less crea5ve and open
Benets Systema5c, analy5c, vigilant processing More situa5onally aware
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New Ultimatum Game
What happened?
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Predictions from Economic theory
People are rational actors In one shot deal offerrer should offer as little
as possible and expect that it will be accepted - $1
Why? Reputation not at stake Receiver should be happy with any offer that
makes them better off even $1 Why? Positive expected value is preferable to 0
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But what happened?
Most offerers offered more than the minimum? Why?
Some receivers refused offers that had a positive value? Why?
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Asymmetry in Goals and Feelings
Offerers are High in Power opportunistic and thinking strategically what is the
most I can get? Generally feel good and expect to do well
Respondents are Low in Power also egocentric, but demand fairness. Rarely happy, often angry, and expect to do poorly
and be exploited
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Key Points Power can blind people to justice concerns
People care about justice, and will punish those they feel are acting unfairly EVEN TO THEIR OWN DETRIMENT Turillo et al. Study
Much of the effect of injustice on retribution is due to the negative emotions associated with injustice (Barsky & Kaplan, 2011)
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Major Biasing Factors
Bad is stronger than good Nega5vity Bias Loss aversion
Easy is bePer than hard Availability bias Conrma5on bias
You and I are dierent Fundamental APribu5on Error
Emo5ons and moods are informa5ve