What is the economic utility theory?
It states that people are basically rational. If people have all the relvant information, they will make a decision that results in the maximum utility.
Expected utility=odds of gain x value of gain
What is utility?
It is the outcomes that are desirable because they are in the person's best interest
What are the advantages and disadvantages of the utility approach?
It provides specific procedures to lead to the best choice, but people can find value in different things, and many decisions involve payoffs that can't be calculated.
What is prospect theory?
Utility depends on subjective gains and losses. Gains and losses are not symmetrical.
Value of prospect=decision weight of probability x subjective utility of value
Explain decision weights for prospect theory
decision weights are lower than the corresponding probabilities except in the range of low probabilities
What is the focusing illusion?
A focus on one aspect of a situation and ignoring other aspects that may be important.
What does justification have to do with decision making?
People who were given a reason to justify were able to make a decision over people who were not able to make a decision. EX: pass, fail, or didn't know yet
Explain the omission bias
It is a tendency to do nothing to avoid making a decision that could be interpreted as causing harm
Explain neuroeconomics and how it approaches decision making
Approaches the study of decision making that combines psychology, neuroscience, and economics. Determines that decision are influenced by emotions and these emtions are associated with activity in different brain areas.
What is the difference between integral and incidental emotions?
integral emotions relate to the actual act of making a decision whereas incidental emotions are unrealted to the decision
What are the two somatic markers that bias decision making?
body loop-changes in body that are projected to the brain and evoke emotion
as-if body loop-cognitive representations of emotions can be activated in the brain without being directly elicited by physiological response.
What are some heuristic seach strategies to problem solving?
What are illusory correlations
correlations that appear to exist, but do not exist or are much weaker than assumed. EX: stereotypes
What is the representativeness heuristic?
the probability that A comes from B can be determined by how well A resembles properites of B
What is the conjunction rule?
Probability of two events cannot be higher than the probability of the single constituents
What is the law of large numbers?
The larger the number of individuals randomly drawn from a population, the more representative the resulting group will be of the entire population
cognitive processes by which people start with information and come to conclusions that go beyond that information
Define deductive reasoning
the particular is inferred from the general. one in which the conclusion follows from the premises with logical necessity.
EX: all men are mortal. Socrates is a man. Therefore, Socrates is mortal
Define inductive reasoning
the general is inferred from the particular. One in which the conclusion follows with some degree of probability. Conclusions are suggested
What is a syllogism?
Contains two premises and a conclusion. It is valid if the conclusion follows logically