Module 6 AEM 2020

Flashcards for vocabulary review

Present Bias

The tendency to overvalue immediate rewards over future ones.

Loss Aversion

Losses are felt more intensely than equivalent gains.

Decision Biases from Prospect Theory

Risk seeking in losses, status quo bias, sunk cost fallacy, loss aversion, overweighting small probabilities.

Ponzi Scheme

A fraudulent investment scheme where returns are paid using new investors' money rather than actual profit.

Bernie Madoff

An investor who ran a $65 billion Ponzi scheme, deceiving clients with consistent returns.

P/E Ratio

Price-to-Earnings ratio; used to determine if a stock is over- or under-valued.

Sternberg's Triangular Theory of Love

Love consists of three components: Intimacy, Passion, and Commitment.

Sternberg's Love Scripts

Sacrifice, War, Garden, Business, Police, Fantasy, Horror, Pornography.

System 1 vs System 2

System 1 is fast, emotional, intuitive. System 2 is slow, rational, deliberate.

Hedonic Treadmill

The tendency to return to a baseline level of happiness despite major positive or negative events.

Happiness Over Lifespan

Happiness tends to be U-shaped, with a low in midlife and rising in later years.

Three Phases of Love

Lust (hormonal), Attraction (dopamine-driven focus), Attachment (oxytocin, long-term bonding).

Economic Model of Marriage

A 'family firm' maximizing joint happiness or utility, potentially led by an altruistic head.

Search Theory Applied to Dating

Like job search: you stop searching for a partner once their value meets your 'reservation score'.

Three Social Preferences

Efficiency (group gain), Equity (fairness), Reciprocity (rewarding kindness).