The Framing of Decisions and the Psychology of Choice

Flashcards created to enhance understanding and recall of key concepts from the lecture on decision-making psychology.

Framing Effect

The phenomenon where the way information is presented influences decision-making and judgments.

Risk Aversion

A preference for certainty over a gamble with a higher expected value.

Prospective Theory

A behavioral model that describes the way people choose between probabilistic alternatives that involve risk.

Expected Utility Model

A theory in economics that assumes individuals make decisions to maximize their expected utility.

Decision Frame

The context or perspective from which a decision problem is viewed, affecting the evaluation of choices.

S-shaped Value Function

A representation of how perceived value is influenced by gains and losses, where losses impact emotional responses more than equivalent gains.

Certainty Effect

The tendency for people to overvalue outcomes that are certain compared to those that are uncertain.

Pseudocertainty Effect

The tendency for preferences to shift as a result of evaluating outcomes conditionally.

Utility

A measure of preferences over a set of goods or outcomes, representing satisfaction derived from them.

Non-linear Decision Weights

The phenomenon where probabilities are not treated linearly in decision-making, leading to overweighting of low probabilities and underweighting of high probabilities.