Lecture 16

Question 1

Affect and decision theory

Answer 1

Many theories such as classical economics and normative theories ignore affect, even though affect influences outcomes

Question 2

Decision inputs influenced by emotions

Answer 2

Anticipated outcome, subjective probabilities, other factors such as vividness, immediacy are processed via feelings before being translated to decision

Question 3

Emotion and subjective probabilities

Answer 3

People over-weight rare probabilities more in high positive affect situations - optimism bias

Question 4

Positive emotion and the prospect theory weighting function

Answer 4

Positive affect outcomes are even more exaggerated than regular curve - low probabilities seem more likely and high probabilities seem less likely

Question 5

Negative emotion and the prospect theory weighting function

Answer 5

Less exaggerated than positive emotion curve

Question 6

Is probability weighting independent from outcome?

Answer 6

Standard prospect theory model says yes, but emotional responses suggest no

Question 7

How accurate is our affective forecasting?

Answer 7

We can usually predict valence but are bad at predicting intensity and duration

Question 8

Impact bias

Answer 8

We mispredict emotional impact of outcomes, because even if they have a strong effect at first, over time there is often not a big difference between good and bad outcomes

Question 9

Why do we experience impact bias?

Answer 9

Focalism: we fixate on the event and ignore other things that may compensate
Recovery: overestimate amount of time to return to baseline
Immune neglect: we fail to anticipate how much psychological immune system will hasten recovery

Question 10

Adaption to events over time

Answer 10

Over time, we attend to regularly occurring negative events less and react less. Hindsight bias - event comes to be seen as inevitable and loses affective power

Question 11

Irrevocable choices

Answer 11

Often happier with irrevocable choices as we rationalize, make best out of situation, adapt. For changeable decisions, we are always on the lookout for alternative

Question 12

Hedonic treadmill

Answer 12

Hedonic reappraisal - we get used to good and bad things, and adjust our baseline. Availability and anchoring influence the endpoints of our happy scales (or rather satisfaction)

Question 13

Hot/cold mindsets

Answer 13

Empathy gap - hard for those in cold (not emotionally aroused) states to understand what they would do in aroused (emotionally aroused) states. That is, human understanding and prediction of activity is state-dependent

Question 14

6 orthogonal components of emotion (towards stimulus)

Answer 14

Certainty, attentional activity, pleasantness, anticipated effort, control, responsibility

Question 15

Incidental emotion

Answer 15

Feelings unrelated to main task influencing decision making

Question 16

Sadness and decision-making

Answer 16

Loss and helplessness -> goal to change circumstances -> low WTA for sellers and high WTP for buyers - reverses endowment effect

Question 17

Disgust and decision-making

Answer 17

Disgust from closeness to objectionable thing -> goal of expelling, avoiding -

Question 18

Regret and uncertainty

Answer 18

Uncertainty as to the final outcome makes us less likely to compare what is to what could have been -> less regret

Question 19

Regret and comparability

Answer 19

The more comparable the actual outcome is with the alternative, the more potential for regret. The easier it is to imagine different outcome, the more regret

Question 20

Regret and Consumer Choice

Answer 20

When we feel regret, we buy more expensive products and well-known brands because we don’t want to regret more - picking the safe option

Question 21

Error of commission

Answer 21

We feel more regret if we did something and had a bad outcome than if we didn’t act

Question 22

Error of omission

Answer 22

Less regret if we did not do something and got a bad outcome rather than act. This can lead to environmentally negative behavior

Question 23

Regret and anticipation

Answer 23

If we anticipate regret before a choice, it can influence what we choose.

Question 24

Three factors that impact decision making

Answer 24

Individual differences, decision architecture, situational factors

Question 25

Gender and decisionmaking similarities

Answer 25

No differences in decision making styles, personality, intelligence

Question 26

Gender and risk

Answer 26

Males judge risks as lower and take more risks. Possibly difference is just about perception. This effect strongest among teenagers

Question 27

Gender and academics

Answer 27

Girls do better than boys; may be due to more negative emotions when fail