PSYC 2650 Chapter Notes - Chapter 13: Risk-Seeking, Mental Accounting

• School: University of Guelph
• Department: Psychology
• Course: PSYC 2650
• Professor: Dan Meegan

Document Summary

Each decision has costs and benefits attached to it. We weigh the costs against the benefits and seek a path that will minimize the former and maximize the latter. We compare factors in a subjective way by asking how important each factor is to us: expressed through the subjective utility (value) of each factor. The utilities can then be summed to evaluate the overall utility for each outcome. Expected value: probability of a particular outcome x utility of the outcome. Many of our choices follow the principle of utility maximization. The change in the way a problem is phrased, (the frame) has a strong impact on participants choices. If the frame casts a choice in terms of losses, decision makers tend to be risk-seeking (willing to gamble to reduce loss) When contemplating gains, decision makers are risk-averse (not risk seeking); they are not willing to gamble and hold what they have.