Monty Hall Lab

Data:

Lab Questions

●        Did your results match those predicted as described in the output? Explain how your results did or did not match the prediction.

Due to the laws of probability, randomly choosing to switch doors or stay with the original will result in a win 50% of the time, choosing to stick with the initial door every time will result in winning about 33% of the time, and switching doors every time will result in winning approximately 66% of the time (Goldstein, 2019). My results did match these predicted outputs. After learning about the Monty Hall problem, I decided to increase my chances of winning most often by always switching my selected door. This led to me winning the prize 73% of the time. While it is a greater output than the predicted 66%, it is reflective of the probability of winning more often by switching doors.

●        Why does switching your choice lead to better odds in the long run?

There is only one prize behind only one of the three doors. The odds of me choosing the winning door at random are 1/3. Since the door being revealed to me does not have a prize behind it, the odds of the prize being in the other door are now increased to 2/3. This heightened probability increases the chances that selecting a new door will result in a win. While I do have some chance at having selected the winning door in the beginning, switching the door is more likely to result in a win. The more often I switch, the better the odds are that I’ll win more often.

Wason Selection Lab

Data:

Lab Questions

●        Why should we expect that the proportion correct should be higher for the thematic rules?

Thanks to the availability heuristic, testing rules is easier to do when we have prior knowledge and experience about those rules (Goldstein, 2019). When we are thinking abstractly, we have to apply logic without prior experience, which is intrinsically more difficult (Goldstein, 2019). I’ve tried this lab three separate times and consistently got worse with thematic rules, which is interesting to me. I find it easier to think abstractly, which I guess makes me an outlier.

●        What does the Wason Selection task tell us about seeking confirmation of our beliefs versus seeking falsification of our beliefs?

When testing rules, we have to find an example that would not work for the rule to determine the rule is false, a principle called falsification (Goldstein, 2019). A confirmation bias effectively blinds us to scenarios that counter what we already know or believe (Goldstein, 2019). Falling victim to confirmation bias will never provide us with real conclusions because we cannot effectively rule out other possibilities. By seeking falsification, we can gain a more holistic view of not only the problem in front of us, but the world around us.

Risky Decisions Lab

Data:

Lab Questions

●        Did you get the predicted results? If so, how so? If not, why not?

Researchers predict that people will be more risk-avoiding when choices involve gains and more risk-seeking when the choices involve losses (Goldstein, 2019). If a gain is guaranteed, people will be more likely to choose the sure gain than they will be to take a risk on a higher gain or a loss (Goldstein, 2019).  Alternatively, people will be more likely to take a risk if the guarantee is losing any amount of money because the alternative is a possible (even improbable gain) (Goldstein, 2019). My results were not consistent with this prediction. I was willing to take a loss (even a large one) if it was more probable that I’d lose a greater amount of money. Alternatively, I was willing to take a small gain if the probability of loss was greater than the probability of gain (even if the risk of loss was similar to the guaranteed loss. I think this was insightful for myself. I ended up making 4,045 by the time the experiment was over, and I believe it was because I was willing to take the guaranteed amount whenever the probability was higher for loss. I think it’s interesting that these results show my tendency for risk-aversion because I feel like I’m a fairly risk-taking person.

●        What does this study demonstrate? In other words, what is the main point of this experiment?

We make so many choices everyday that we often don’t pay much attention to because they don’t have a large effect on our life in general. However, when stakes are high in situations where we stand to gain or lose something, these choices become more significant. Understanding how we approach these impactful decisions can give us insights into our tendencies. If we stand to gain so we default to risk-taking, we should be aware of the impact the risk may take and give ourselves the opportunity to evaluate the situation in broader terms. Knowing that our tendency to avoid risk when it comes to losses is another insightful tool to help analyze our behavior. It may not always be in our benefit to avoid a risk for fear of loss or failure. Again, a holistic view is helpful in navigating life and this experiment shows us our tendencies.

Module Question

●        What is the relevance of the Wason Selection task and Risky Decisions for financial decisions?

The Wason Selection task asks us to try thinking of abstract views in thematic ways to improve our understanding. Risky Decisions asks us to evaluate our tendencies surrounding risks. When making financial decisions that we may not have approached before, the Wason Selection task shows us that the concept might be better understood if we frame it differently. The Risky Decisions experiment shows us how often taking risks can lead to losses and gains. By understanding our financial decisions in a framework more familiar to us and utilizing risk-taking knowledge, we can approach these decisions more logically and reasonably.

References

Goldstein, E. B. (2019). Cognitive Psychology (5th ed.) Cengage. https://www.cengage.com/