Summary
Summary of the lectures for Judgment and Decision Making
- Module
- Institution
Summary of all lectures for the course Judgment and Decision Making for the minor Understanding and Influencing Decisions in Business and Society.
[Show more]
Seller
Follow
dominiquevschagen
Reviews received
Content preview
Dominique van Schagen Judgment and Decision MakingJDM all lectures
Judgment and Decision Making Lecture 2
Major reflective decisions
- buy a house
- invest or not
Low level decisions
- what to wear today
Factors that should affect a decision:
- what you want (to avoid)
-
Rational decision making process:
- define the problem
- identify decision criteria
- weigh the identified decision making criteria
- generate possible alternatives
- rate each alternative against the decision maker’s criteria
- compute the optimal decision
Assumptions need to be made before making a decision:
- assume the decision maker is rational
- assume the problem is clear and unambiguous
- assume the decision maker has complete information
- assume
- assume
expected utility theory:
A gamble consists of:
1. Probability p
2. Value v
Expected value of a gamble (EV) = p x v
4 principles (Axioms)
- Dominance
alternative gambles can be ranked from best to worst in terms of expected value.
Preferences should be consistent (not to be changed by framing for example)
- Cancellation
a choice between gambles should depend only on those outcomes that differ (options
that are the same but differently formulated should cancel out)
- Transitivity
if you prefer A to B and B to C, then you must prefer A to C
, Dominique van Schagen Judgment and Decision Making
- Invariance
preference should remain invariant of stable, no matter how choices are described
Prospect theory:
- Describes reality better and will be better predictable than expected utility theory
- Reference point can change, is subjective because losing/winning is compared to the
environment
- Value function: v(x-r)
- Reference point because:
o People compare income to friends, parents, goals, expectations, ,…
o Easier to compare with an r than evaluate absolute utility
o Natural degree of adaptation (e.g. brightness, loudness, temperature, …)
Loss aversion:
The pain associated with a loss of a given amount is larger
JDM lecture 3 – mental accounting
What is mental accounting?
- Compare with financial/managerial accounting
- “set of operations used by individuals and households to organize, evaluate, and keep
track of financial activities”
Framing outcomes
- Minimal account
o Examining only differences between two options, disregarding all other
features (same answer in both versions example question)
- Topical account
o Relates consequences of possible choices to reference level determined by
context within which decision arises (alter choices example question)
- Comprehensive account
o Incorporates all other factors (same answer in both versions example question)
How does someone wish to frame receipt of multiple outcomes?
- Given shape value function, should look like this:
o Segregate gains
o Integrate losses
o Integrate smaller losses with larger gains
o Segregate small gains from larger losses
GAINS: hedonic editing hypothesis supported
- Temporal separation produces more happiness
LOSSES: hypothesis not supported
- Idea that separating losses is a good idea
IMPLICATIONS:
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller dominiquevschagen. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.90. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
64257 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 15 years now
Recently viewed by you
Exam (elaborations) ·
WAPS SSGT- Military Org and Command- Military Departments questions with 100% correct answers
Summary ·
Samenvatting - Neuropsychology and Psychopharmacology (P0V90A)
Exam (elaborations) ·
Test Bank for Pediatric Nursing a case based Approach 1st Edition Tagher Knapp 2024
Summary ·
Samenvatting - VZOM Geestelijke gezondheidszorg
Summary ·
Lijst met alle aandoeningen uit vraagstukken bewegen
