PSYCH 120A Chapter Notes - Chapter ZAPS 14-15: Availability Heuristic, Representativeness Heuristic, Prospect Theory
Document Summary
Decision making: selecting best alternative from several options. Determine relative costs and benefits of each choice then rationally choose the most favorable. Expected utility theory: people calculate the expected utility, or value, of the possible choices and choose the option that maximizes the desired outcome. What people would do if completely rational. Prospect theory: people evaluate the psychological prospects of the choices rather than the objective expected values. Cost aversion: people are more eager to avoid costs than potentially gain benefits. Framing: the way a choice is worded changes the psychology of how people perceive the choice. The value of the the choices" prospects determines what people do as opposed to objective expected values. When making estimates in the second question, people start from the anchor established in the first question. One"s judgement is affected by the results of a previous estimate even if both were intended to be made independently.
