# lesson 16 decision making Flashcards

1
Q

how we divide up time

A

past, things that were (learning and memory)

present, things that are (perception)

future, things that will be

2
Q

prospection

A

human ability to think flexibly about often far future events

3
Q

prospection vs decision making

A

prospection: ability to think about the future

decision making: what i can do right now that will allow me to avoid certain outcomes/make other outcomes more likely

4
Q

expected utility theory

A

neumann and moore: there’s a rational way to compute optimal outcome (expected value)

5
Q

economists expected value

A

given i do something, what’s the likely outcome

odds of gain * value of gain
if it comes up heads you get 10,should you pay \$4 to play
(1) * 4 = 4
(1/2) * 10 = 5, chance to win high

6
Q

errors of odds (has to do with odds of gain)

A

humans are bad at just figuring out how likely it is that things will happen

-sample size neglect
-gambler’s fallacy
-availability bias
-planning fallacy

7
Q

errors of valuation (has to do with value of gain)

A

humans are also surprisingly bad at figuring out what kinds of things will feel good in the future or not
-presentism
-relative valuation
-gain/loss nonlinearity
-temporal discounting

8
Q

errors of odds: sample size neglect

A

bias where one evaluates statistical information and arrives at an erroneous conclusion after failing to consider the sample size of the data set

*example of harvard vs yale rhode scholars, harvard looks like more but harvard has more students

9
Q

errors of odds: gambler’s fallacy

A

the belief that the likelihood of a chance event is influenced by the nature of the events that preceded it

10
Q

the myth of the hot hand

A

there is no such thing- someone who is an 80% free throw shooter has an 80% chance of sinking the shot no matter if they had 5 misses of 5 makes before it

11
Q

errors of odds: availability bias

A

the human tendency to rely on information that comes readily to mind when evaluating situations or making decisions

ex: republican voters are more exposed to stories about violent crime in the us so its more important to them than democratic voters who hear about other things

12
Q

errors of odds: the planning fallacy

A

underestimate how long it’ll take to finish things due to the little things that are hard to keep in mind while making estimation

13
Q

errors of valuation: presentism

A

decide how much your future self wants to eat but you dont realize how much you cant escape the feelings thoughts or expectations you have in the present

*ex: shoppers going into grocery store hungry vs shoppers who are full buy more food

14
Q

errors of valuation: relative valuation

A

value things not in absolute terms, but relative to other things (like weber’s law, different between 1 and 2 is more noticeable than difference between 9 and 10)

15
Q

errors of valuation: gain/loss nonlinearity

A

kahneman and tversky
think of the way people subjectively value things

one consequence of this is people operate way differently in a loss vs gain domain

curve relationship

losses loom larger than gains

16
Q

the curves asymptote

A

40,000 is the same as 40,100 but 100 is different from 200

16
Q

errors of valuation: temporal discounting

A

we tend to value things in the future less than we value them now

10 now vs 12 next week- we’ll take the immediate payoff

hard time suppressive enticing aspects of the now to make rational decisions for future self

17
Q

losses loom larger than gains: the endowment effect

A

people dont like giving up things that they are endowed with because the are in a loss frame