psyc of risk

Question 1

revealed risk

Answer 1

how much risk a person is willing to take based on the expected utility of the outcome

Question 2

what is expected utility

Answer 2

expected value of an action to an age calculated by multiplying the value to the agent of each possiable outcome of the action by the probability of the outcomes occurring and then summing those numbers

Question 3

expected utility theory

Answer 3

assumes that individuals make choices to maximise their expected utility
decision under risk involves choosing between lotteries

Question 4

3 step processes

Answer 4

evaluate each corse of action
multiple consequences
chose course of action with highest total expected utility

Question 5

three step process equation

Answer 5

EU=Ep(x1) u (x1)

Question 6

implications of the allais paradox

Answer 6

challenges universality of eut and reveals descrepency between rational choice theory

Question 7

who created prospect theory

Answer 7

kahneman and tversky 1979

Question 8

prospect theory ?

Answer 8

decision making is often influenced by framing and perceived certainty

Question 9

define risk seeking

Answer 9

preferes uncertain outcomes to certain outcomes,utility over probablility

Question 10

define risk aversion

Answer 10

prefere certain outcomes to uncertain outcomes, even with lower utility

Question 11

define risk neutral

Answer 11

indifferent between certain and certain outcomes even with same expected utilities