Psych 458 - Questions to ponder, 4/28/99
Plous, Chapters 7-9
Note: These chapters launch into a discussion of expected utility without highlighting an explicit explanation of what that is. Expected utility is the expected value of an outcome multiplied by its likelihood of occurring (or, another way of thinking about this is if you made the decision repeatedly, what would the average utility of the outcome be?). The simplest form of expected utility is the probability of something occurring times its Autility@ which is usually given in dollar terms. Thus, if there is a 50% chance you will have fun at the party you attend Saturday night, and the utility of having fun at a party is worth $25 to you, the expected utility of attending the party is $12.50.
1. What do we mean by saying that expected utility theory is a normative theory of behavior?
2. What are the 6 axioms of Von Neumann & Morgenstern=s expected utility theory?
3. How did Savage amend Von Neumann and Morgenstern=s version of expected utility theory? Why is this important?
4. Which of Von Neumann & Morgenstern=s axioms does Allais= paradox violate? What about Ellsberg=s paradox?
5. In Tversky=s 1969 study (that Plous cites), how were research participants demonstrating intransitivity?
6. According to Lichtenstein and Slovic (1973, as cited in Plous), when it comes choice, are people more likely to choose the high probability-lower payoff option or the low probability-higher payoff option? What about when people are asked to price these options?
7. What are the potential costs associated with using normative principles?
8. What is satisficing? Why is it a good strategy? Why is it not a good strategy?
9. Why is having a reference point important in Kahneman & Tversky=s (1979) prospect theory? In what ways are gains and losses not symmetrical?
10. (The answer to the following is not discussed in the book.) Why might it be adaptive for losses to loom larger than gains?
11. Do we underweight or overweight low probabilities? What about moderate and high probabilities? Why might this be the case? (think contrast)
12. How are certain events treated in a way that would not be predicted by standard expected utility models?
13. How does regret get factored into the choice between alternatives?
14. What are multi-attribute choices? What are some models of multi-attribute choice?
15. What are noncompensatory strategies? List & define 4 examples. Why might these be good strategies? Under what circumstances might they be bad?