able that can be combined with base rates so that a more accurate prediction can be
made?3. Which Thinking Skill or Skills Will Get You to Your Goal?
thinking skills have been presented for use when working with probabilistic events.
One of the most useful is drawing a tree diagram complete with probability values on
each branch. This method allows you to "see" and objectively compute the likelihood
of multiple outcomes. When you are combining information with base-rate information, it is important to form the appropriate ratios so as to avoid the problem of
base-rate neglect. Other skills require recognition of the type of error that frequently
occurs (e.g., conjunction error, failure to consider cumulative risks) and use of the "or"
and "and" rules to improve probabilistic decision making.Because there are so few things in life that are known with certainty, the skills for
understanding and using probabilities should be used frequently. After reading this
chapter, you should be able to:
4. Have You Reached Your Goal?
|• ||Compute expected values in situations with known probabilities.|
|• ||Recognize when regression to the mean is operating and adjust predictions to
take this phenomenon into account.|
|• ||Use the "and rule" to avoid conjunction errors.|
|• ||Use the "or rule" to calculate cumulative probabilities.|
|• ||Recognize and avoid gambler's fallacy.|
|• ||Utilize base rates when making predictions.|
|• ||Use tree diagrams as a decision-making aid in probabilistic situations.|
|• ||Adjust risk assessments to account for the cumulative nature of probabilistic events.|
|• ||Understand the differences between mean and median.|
|• ||Avoid overconfidence in uncertain situations.|
|• ||Understand the limits of extrapolation.|
|• ||Use probability judgments to improve decision making.|
|• ||Consider indicators like historical data, risks associated with different parts of a
decision, and analogies when dealing with unknown risks.|
The reason for considering probabilities is
to quantify and reduce uncertainty. You will have reached your goal when you can
attach more accurate probability values to uncertain events.
|1. ||Because few things are known with certainty, probability plays a crucial role in
many aspects of our lives.|
|2. ||Probability is defined as the number of ways a particular outcome (what we call
a success) can occur divided by the number of possible outcomes (when all outcomes
are equally likely). It is also used to indicated degrees of belief in the likelihood of
events with unknown frequencies and previous frequency of occurrence.|
|3. ||In general, people tend to be more confident about uncertain events than the
objective probability values allow.|
|4. ||Mathematically equivalent changes in the way probability information is presented can lead to dramatic changes in the way it is interpreted.|
|5. ||Tree diagrams can be used to compute probabilities when there are multiple
events (e.g., two or more flips of a coin). When the events are independent, the|