Treatment Decision Making

Question 0

What is the maximum expected utility?

Answer 0

Maximum expected utility is the greatest expected utility. The correct and most rational choice.

Question 1

What is the Classical Decision Theory as theorised by von Neumann and Morgensten? Expected utility theory.

Answer 1

It is a normative theory how people should make their decisions. Based on probability. A structure linking the choice made with peoples value towards the outcomes of options and the probably of these outcomes occurring.

Question 2

What are the six rules to probability theory (axioms)?

Answer 2

Ordering - one option over another
Transitivity- If A beats B, B beats C, A beats C
Invariance - presentation of an option should not affect preference
Continuity- individual shouldn’t compromise, should choose best
Cancellation- both actions have same consequence, shouldn’t affect decision.
Dominance- never choose an option with a dominated attribute.

Question 3

As individuals can’t calculate the EUT, Bounded Rationality (by Simon) is used. What are the processes?

Answer 3

1. Satisficing (by Simon) choosing 1 desired criterion, then comparing options for this criterion.
2. Elimination by aspects (by Tversky) choose one aspect and trade off extra aspects.

Question 4

There are two information processing strategies, what is System 1?

Answer 4

System 1 is fast and intuitive, choice made on small piece of information. Sub conscious, little effort but may lead to regretting choices.

Question 5

There are two information processing strategies, what is System 2?

Answer 5

System 2 is slow and analytic, it is conscious and time consuming and is less likely to lead to regret.