MAR 4503 Lecture Notes - Lecture 8: Affect Heuristic, Decision-Making, Prospect Theory

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9 Jun 2016
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Decision making 2
Human beings chose to maximize utility
Choose an option that will give us the highest utility
Consumer judgement
A judgement is an estimate
Difference between a judgement and a choice: in choice you have an option to choose, and
judgement is a classification.
Heuristics are used to simplyfy judgements
Affect heuristic
People don't focus on data, but in how they feel. People's feelings often guide their decisions
People use resemblance to judge probability. It can also be used to judge quality.
Anchoring and adjustment
Start an estimate at an initial value (anchor) and then adjust accordingly
It is used in pricing (publix vs. whole foods), negotiations,
Nudging
Marketers can influence heuristic decision making.
The way in which the option is placed, like framing, can influence the final outcome
Nudging: subtle changes in the environment that can alter perception
Framing
The way a choice is out into context. The framing can affect the final outcome.
Describing the same option in different ways lead to different preferences
Prospect theory
We value prospects as gains or losses
Reference point
Standard comparison against which an observe option
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