notes march 8

notes march 8 - being better than others Math the same....

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Choice o Utility- an all-purpose metric o Can ask people to rate value of $100 a puppy and a quick meal on the same scale, maybe 1 to 10 o When ask people to make their own probability estimates, call these “subjective probabilities” o Get SEU models – subjective expected utility Choice o Notice normative character of EV and SEU models: Predict rational choice, given the starting info o Other social science is descriptive, which is predictive o If people are rational in some domain (testable), then same model can be both Choice o Aggregation, or the law of large numbers, sometime applied in order to use a normative model for prediction Assumption is that errors (irrationalities) are random and cancel out with a large enough sample If the rational model is mathematically derived, this raises hope of discovering a “law” of human behavior Choice o Decision under risk Key thing is that one choice has punishing results, instead of one just
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Unformatted text preview: being better than others Math the same. Psychology of it may not be. Choice o In the win v. raisins example, notice how probabilities (of weather events) were obtained empirically Historical frequency data applied to estimate probabilities Earlier textbook exs, probabilities were from math o Wine v raisins also shows: Value of information = EV with information EV without information Notice that EV can be for one decision branch or for several added together o Similar reasoning shows value of control (being able to change outcomes) or insurance o In case of insurance, the decision may not reflect precise monetary values Some losses may be worth more than others utitlity is the key to predicting human behavior even if money is the key to specifying economic rationality...
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notes march 8 - being better than others Math the same....

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