Lecture14-DecisionMakingSloman - 10/25/09 Decision Making...

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10/25/09 1 Decision Making Steven Sloman Assume yourself richer by $300 than you are today. Choose between a. a sure gain of $100 b. 50% chance to gain $200 and 50% chance to gain nothing Assume yourself richer by $500 than you are today. Choose between c. a sure loss of $100 d. 50% chance to lose $200 and 50% chance to lose nothing
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10/25/09 2 Framing effects ==> Risk aversion in the domain of gains. ==> Risk seeking in the domain of losses. Framing effects Negative message : People do not make decisions based on consequences, but rather relative to a reference point. Positive message : Loss aversion: Losses loom larger than gains. Individual Risk Risk Situation 1: While attending the movies last week, you inadvertently exposed yourself to a rare, fatal disease. If you contract the disease, you will die a quick and painless death in one week. The chance that you will contract the disease is exactly .001 -- that is, one chance in 1000. Once you get the disease there is no cure, but you can take an inoculation now which will prevent you from getting the disease. Unfortunately, there is only a limited supply of inoculation, and it will be sold to the highest bidders. What is the most you would be willing to pay for this inoculation? (If you wish, you may borrow the money to pay at a low rate of interest.)
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10/25/09 3 Risk Situation 2: Some professors at a medical school are doing research on the disease described above. They are recruiting volunteers who would be required to expose themselves to a .001 (one chance in 1000) risk of getting the disease. No inoculations would be available, so this would entail a .001 chance of death. The volunteer from this audience who demands the least money will be taken. What is the least amount of money you would require to participate in this experiment? More money demanded in 2 than willing to
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This note was uploaded on 10/01/2011 for the course COG SCI 10 taught by Professor Lombrozo during the Fall '09 term at University of California, Berkeley.

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Lecture14-DecisionMakingSloman - 10/25/09 Decision Making...

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