PSY270H1 Lecture Notes - Lecture 9: Random Search, Functional Fixedness, Marginal Utility
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Decision making is a specific type of judgement that involves choices between different outcomes. Irrational: follows the law of contradiction (you say you prefer a to b but you also prefer b to a) Expected value theory is a normative model from economics; assumes that people calculate the monetary value of each option and choose the higher one. We calculate the expected value of a choice by multiplying the value by the probability that it will occur. But people don"t use monetary value to make decisions, they use utility. In choice problem #2, there is a sunk cost, it"s more often that they are uncomfortable refunding them, because they already have the tickets. It matters whether the choice options are stated as potential gains or potential losses. If framed as potential loss, people are more risk seeing. If framed as potential gains, people are more risk averse. * if there"s a greater chance you"re gonna win, it"s considered less risky.
