wk 9 cog

Question 1

choices

Answer 1

riskless multiattribute choice

Intertemporal Choice - choose an option now or future option

Decisions under uncertainty

Decision under risk (do know probability)

Question 2

expected value

Answer 2

sum of each possible outcome weighted by its probability

e.g. 80% chance of getting £4000 would be 0.8 x 4000 + 0.2 x £0

Question 3

people are risk averse when it comes to

Answer 3

gains

Question 4

expected utility theory

Answer 4

a rational … perception

FINISH

Question 5

prospect theory

Answer 5

-there is an editing phase (rounding, processes number)
-reference point (how much money u have)
-Value
- Decision weights

Question 6

endowment effect in

Question 7

certainty effects and non - linear probabilities

Question 8

problems with prospect theory: limited scope

1 example

Answer 8

two choices:
A 95% chance to win $2.50 and a 5% chance to lose $0.75
P-bet
A 40% chance to win $8.50 and a 60% chance to lose $1.50
$-bet

An hour later… You own a ticket for this bet.  What is your minimum selling price?

Finish

Question 9

problems with prospect theory: limited scope

Attraction effect

Answer 9

Option A. 40% chance of $25
Option B. 30% chance of $33
Option C. 40% chance of $20
(60% CHOOSE A)

Option A. 40% chance of $25
Option B. 30% chance of $33
Option C. 25% chance of $33
(75% CHOOSE B)

Question 10

Prospect theory as purely descriptive

Answer 10

descision by sampling.
sampled bank accounts gains and loss.

Prospect theory doesn’t care waht teh processes are, just describes