Lecture 11&12&13 - Decision Making Flashcards
homo economicus
= rational own-payoff maximizer
- sophisticated rational beliefs, stable preferences, maximizes own payoff, disregards other peoples well-being
-> factoring out each potential bias (ex. time pressure, stress, …)
therefore, not real-life applicable …
decision making - processes
- goal-directed behavior
- reward learning & memory
- executive control
- inferece to establish causal links
- often in a social context
economic vs psychological decision making model
economic: rational (but choice bias)
psychological: context dependent choices (social, cultural, moral)
idea of neuroeconomics
= combination of psychology, economics and neuroscience
-> including social context of decision making, evaluates underlying circuits in value-based decision making, investigates which brain chemicals are involved
why studying decision making?
- phylosophically (value of decisions)
- economically (consumer decisions; nudging (leading decision making))
- clinical (maladaptove decisions)
+ gambling disorder, impulsive traits, anto-social or norm disregarding decisions
expected value
multiplication of objective value times probability (magnitude, times itr probability)
risk vs ambiguity
risk = known variance of distribution (gamble effect) ambiguity = unknown variance (outcomes); unknown probabilites, need to infer about those
reference effects
utility is a subjective value, everyone has own starting/reference point (= marginal utility)
risk aversion
preferring lower certain reward over risky higher (on average) reward
-> valuing certainty over gamble (everyone has own subjective treshold about that)
[certainty equivalent shows risk aversion level]
[for gains, the mean utility of the win and loss gamble is worse than the utility of the (mean) certain outcome]
when do people become risk seeking? (reflection effect)
in the loss domain
-> the curve in the loss domain is much steeper than in the gains domain (loss is waited much more heavily)
[for gains, the mean utility of the win and loss gamble is better than the utility of the (mean) certain outcome]
-> losses loom larger than wins
- less losses required to offset pros -> utility gains
- implications for framing
ambiguity aversion
preference for known risks over unknown risks
probability weighting
- people overestimate small chances
- people underestimate large probabilites
purpose of rewards
reinforce behavior
-> primary or secondary reinforcers
[remember law of effects, William James]
role of dopamine (+ where it is produced)
associated with rewards
dopamine - basics
- > produced in midbrain and basal ganglia (substania nigra) [also adrenaline], its a catecholamines
- > innervation of large parts of the cortex
- > changes firing probabiliy of neurons (motor and cognitive effects, therewith effects decision making)