PSYCH 3312 Lecture Notes - Lecture 27: Utility, Availability Heuristic, Loss Aversion

• School: Ohio State University
• Department: Psychology
• Course: PSYCH 3312
• Professor: Rosalee Meyer

Document Summary

4) decision making - humans as rational thinkers. Decisions involve formulation and choosing courses of action, based on one"s goals, using any evidence that is available. Expected value theory is a normative theory. Normative theory - prescribes what ppl should do, not what they actually do. Descriptive theory - what they actually do. Values vi (can be > 0, =0, < 0 ) Expected value: ev = sum (pi * vi) Prize 1: v1 = , p1 = 0. 1. Prize 2: v2 = , p2 = 0. 3. Blank: v3 = sh, p3 = 1 - p1 - p2 = 0. 6. Ev = (0. 1 * ) + (0. 3 * ) + (0. 6 * sh) = . 50. Every decision is viewed as a gamble. Option 2: a 50-50 chance of million or nothing. Expected utility theory is similar to expected value theory, just replace objective. The rational choice is to select the option w/ the highest expected utility.