Problem solving

Question 1

Humans decision making

Answer 1

• We assess the consequences to select an option from several possibilities.
• should vs do make decisions.

Question 2

Expected value theory

Answer 2

• What is the expected value theory?
• The sum of the value of each potential outcome multiplied by the probability of it occurring. In real life people will go for a sure option than the option with the higher reward e.g. .25 chance of winning £30 over .20 chance of winning £40. However, when gambling or buying lottery tickets the high of gambling cancels the anxiety of the risk.

Question 3

expected utility theory

Answer 3

-Goal is to maximise utility which depends on goals and value.

Question 4

Subjective utility theory

Answer 4

-Preferences and utility is considered

Question 5

Reasoning and preference

Answer 5

• When making a decision we look for reasons to justify the decision.
• Wording that emphasizes positives enhances preference.

Question 6

Context effects

Answer 6

• It is assumed that humans will evaluate each option individually and the best is chosen.
• However, in real life we see the attraction effect. This means that if option A and B are good in different ways, but option C has the same good quality as A but is slightly worse, A will be seen as dominant and preferred. Violates expected utility theory.

Question 7

Prospect Theory

Answer 7

• We assume humans are unwilling to accept bets involving potential loss even if there are more potential gains
• This is supported by the Asian disease problem as even though all options produce the same average outcome the gain framed option is more likely to be chosen than the loss framed option (framing effect)
• framing effect disappears if more thought and detail is given e.g. list advantages and disadvantages
• The fairness norm (probabilistic over deterministic)

Question 8

Impact bias

Answer 8

-Participants overestimated the impact of loosing a bet would have on their happiness (lasting and intensity)

Question 9

Complex effects

Answer 9

• Personal decision: loss = regret = riskier choices, win = rejoice
• computer decision: loss = disappointment, win = elation = riskier choices

Question 10

Individual differences impact decision making

Answer 10

• Self-esteem: people with high self esteem were more likely to make risky gambles as they were not as embarrassed by loss
• Narcissism: riskier investments in stock market as they are more sensitive to reward
• Emotions: Anxiety when making a decision makes you pick a different option

Question 11

Rare events impact decision making

Answer 11

We place a lot more weight on rare events e.g. bus bombings = people avoided all buses.

• it is salient and there is an automatic emotional response
• this is predicted by prospect theory

Question 12

Brain damage and risky choices

Answer 12

• Amygdala (heavily involved in emotions reactions and reward sensitivity), for potential gains
• ventromedial pre-frontal cortex (vmPFC) damage results in Increased risk seeking for gains and losses especially is probability of success is low
• Therefore, the amygdala is a cautionary break as we stop and think