decision making - final

Question 1

expected value (EV)

Answer 1

• average outcome if a scenario is repeated many times
• calculated using probabilities and values of possible outcomes
• Ex. 75% chance of winning $200, 25% chance of winning $0.
• EV= (.75 x 200) + (.25 x 0) = $150

Question 2

rational choice

Answer 2

in order to maximize outcome, choose greater EV

• A: win $125
• B: 25% chance of winning $400, 75% chance of winning $0.
• EV= (.25 x 400) + (.75 x 0) = $100
• choose A

Question 3

advantages with using expected outcome

Answer 3

advantages

• clear prescription for correct choice
• leads people, on average, to maximize monetary gains given what they know about the world
• keeps people’s decisions internally consistent

Question 4

problems with using expected value

Answer 4

• difficult to apply for non-monetary decisions

- doesnt explain actual choices by actual people

Question 5

prospect theory

Answer 5

• daniel kahneman
• people do not make decisions based on EV, probabilities, and absolute outcomes
• people make decisions based on subjective utility, decision weights, and relative outcomes

Question 6

subjective utility

Answer 6

• people transfer objective value into subjective utility (usefulness of outcome)
• diminishing marginal utility : subjective utility increased more slowly than objective value, esp. at large values
• individual differences

Question 7

loss aversion

Answer 7

• losses loom larger than gains

- losing $20 feels worse than winning $20 feels good

Question 8

decision weight

Answer 8

• people transform objective probability into subjective decision weights
• small probabilities (>0%) are overweighted: 1% feels like 0, 51% feels like 50
• large probability (<100%) are underweighted : 99% feels a lot less than 100%, 50% feels same as 51%

Question 9

framing effect

Answer 9

• people make decisions based on gains and losses relative to a point of reference, not based on absolute outcomes
• changing the way a question is asked to create a different point of reference leads to different valuations and thus different choices

Question 10

people make decisions based on individual: (3)

Answer 10

• subjective utilities : diminishing marginal utility & loss aversion
• decision weights :
  underweight large probabilities & overweight small probabilities
• relative outcomes :
  reference dependence, gain & loss framing

Question 11

dopamine

Answer 11

• schultz, dayan & montague

- single until recordings from monkey’s midbrain dopamine neurons in ventral segmental area

Question 12

learning driven by rewards

Answer 12

• activity of midbrain dopamine neurons is related to reward
• but dopamine neurons do more than simply report occurrence of reward
• they code deviations from predictions about time and magnitude of reward

Question 13

prediction error

Answer 13

PE = actual reward - expected reward
>0, better than expected
= 0, as expected
< 0, worse than expected

Question 14

dopamine pathways in human brain

Answer 14

-midbrain dopamine neurons project to basal ganglia, prefrontal cortex, and other areas

Question 15

Obital frontal patients : emotion and decision making

Answer 15

• bechara 1994 : compared control participants and patients with damage to orbital frontal cortex
• patients : perform normal on IQ tests, normally on tests of cognitive control, seem to make poor decisions in life

Question 16

Iowa gambling task & OFC patients

Answer 16

• goal to win max amount of money
• compared control to OFC patients, used 100 deck choices
• asked what they thought about decks, recorded choices, measured skin conductance at time of decision making (e.g. sweaty palms)

Question 17

Iowa gambling task

Answer 17

• conceptual knowledge alone did not lead to good decision making
• predictions of expected emotions necessary for good decision making
• expected emotions receded conceptual understanding
• OFC patients could not generate expected emotiong
• patients overemphasized immediate reward over long-term outcomes