Final Flashcards
A scratch off lottery ticket that you paid $6 for has the following possible outcomes
5.20
If you were using the expected utility theory, which of the following lottery tickets should you prefer? Assume that they each cost 2$
p=.001 to win $10,000
The St. Petersburg paradox demonstrates what principle in understanding how people place value on money?
Diminishing returns
Framing effects are violations of axiom of expected utility theory?
Invariance
Framing effects are violations of which axiom of expected utility theory?
Invariance
Framing effects illustrate that we tend to risk seeking in a ___ frame and risk averse in a ____ frame
Looses, Gains
To account for violations of expected utility theory, prospect theory has a____ shaped value function
Curvilinear
The probability weighting function of prospect theory accounts for the observation the many people think that very rare events are_____ and nearly certain events are_____
More likely than they are; Less likely than they are
Someone who always chooses the alternative with the highest expected utility is called a….
Maximized
When preference for an object increases linearly with increases in quantity, we call it_____
A mono tonic preference
Tonal loves spicy Thai food, but prefers to order it as a 3 on a 5 point scale from 1 to 5. What kind preference best maches this?
Ideal- point
Which s t of authors created the ideal point theory of preference?
Coombs & avrunin
Research has shown that people often make different decisions if they focus on choosing between two things or rejecting between two things. That theory was used int the lecture to explain this pattern?
Reason based choice
What evidence was used in the lecture to support the idea that our preferences are often constructed rather than remembered?
Decoy effect
In the Huber, Payne, and Puto study, participants were presented with two equally attractive alternatives and a decoy that dominated A but not B. Which alternative did people prefer most often in this situation?
A
