decision making

Question 1

key aspects of decisions

Answer 1

choices
outcomes
beliefs
values

Question 2

expected value theory

Answer 2

we chose based on the highest expected value

so want gamble with highest outcome

Question 3

St Petersburg paradox

Answer 3

coin - heads win and doubled each time
so infinite £
but people not willing to play

Question 4

Bernoulli’s curve

Answer 4

we do not base decisions on objective value, but instead on utility
so make the decision based on what makes us happy not what gives most money

Question 5

expected utility value

Answer 5

you dont know outcome but have beliefs on how likely
so have expected outcome
maximize the expected utility
so happiness over money

Question 6

neural currency

Answer 6

• A set of brain area which evaluates the value of different items all on common scale?
• This is often called utility (or subjective value)

Question 7

loss aversion

Answer 7

the loss of an amount is felt much more than the gain of the same amount

Question 8

endowment effect

Answer 8

value of an item depends if you own it
something you own has higher value
so interpretation that losing it is worse than gaining it

Question 9

framing effect

Answer 9

the way a gamble is framed can alter how you decide

negatively such as deaths over survivors means less likely to choose

Question 10

prospect theory

Answer 10

describes how we actually decide on something
the utility (joy/pain) is related to loss or gain.
-You could be rich and lose a small amount and still feel very bad
-Explains loss aversion
and framing effect

Question 11

absolute (prospect theory)

Answer 11

• Before, unity was defined in absolute terms

- My bank has a certain amount of money in it and my happiness is directly based on this number

Question 12

relative (prospect theory)

Answer 12

-My happiness is based on changes in my bank, doesn’t matter if I have a lot of money or not, if number goes up, I’m happy and if it goes down, I am unhappy

Question 13

probability bias

Answer 13

People act as if – low probability events are more common than they are, and high probability are less common than they are

Question 14

criticism of prospect theory

Answer 14

only describes and does not give psychological explanations

Question 15

decision in time

Answer 15

decision between immediate grain or delayed gratification

use internal subjective value of the reward

Question 16

things effecting decision in time - more impulsive

Answer 16

addiction - smoking
overweight
hunger
personality - extroversion less willing to wait

Question 17

things effecting decision in time - less impulsive

Answer 17

older age

anorexia