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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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- Spring '10
- Economics, Predict rational choice, SEU models