Johnny Ch Lok

Behavioral Economic Strategic Business Case Studies Johnny Ch Lok

The field of behavioral decision research, on which behavioral economics has drawn more than any other subfield of psychology, typically classifies research into two categories: judgement and choice. Judgement research deals with the processes people use to estimate probabilities. Choice deals with the processes people use to select among actions, considering of any relevant judgements who may have made. Everyday, we need to make probable judgement. Due to judging the likelihood of events is central to economic life. For example: Will you lose your job in a poor economic environment? Will you be able to find another house you like as much as the one you must bid for right away? Will the government raise interest rates? Will a merger strategy increase profits? These questions are answered by some process of judging likelihood. The standard principles used in economic to model probability judgement in economic are concepts of statistical sampling, which are concerned probabilities in the face of new evidence. However, it requires a separation between previously judged probabilities and evaluations of new evidence. However, people often overestimate the probability who previously attached to events which later happened. This leads to "second guessing". For example, Monday morning quarterbacking and may be partly responsible for lawsuits against stockbrokers who lost money for their clients. ( The clients think the brokers should have known). For example, anybody has tried to learn from a computer manual has seen the curse of knowledge in action. Another example for making probability judgements is called "representativeness" People judge conditional probabilities like P(hypothesis /data) or P( example/class) by how well the data represents the hypothesis or the example represents the class. Representativeness is an economical shortcut that delivers reasonable judgements with minimal effort in many cases. For example, in judging whether a certain student described in a profile is, say, a psychology major or computer science major, the student decides how well the profile matches the psychology or computer science career to the student generally.