Psych help

What is a risk premium?

The extra reward a person requires to choose a risky option over a guaranteed one with the same expected value

How is risk premium calculated?

Risk premium = expected value − certainty equivalent

What does a high risk premium indicate about a person?

They are more risk-averse and strongly prefer certainty

What is temporal discounting?

The tendency to value immediate rewards more than future rewards

What is present bias?

The tendency to give stronger preference to rewards that are available right now over future rewards

What is hyperbolic discounting?

A pattern where people discount future rewards sharply in the short term but less over longer delays

What was the main mistake in “The Perfect Pepsis” from Blink?

Assuming there is one perfect product when preferences are actually variable and context-dependent

What did the “Extra Chunky Garden Style” pasta sauce example show in Blink?

That there are multiple preference clusters and people often don’t know their preferences until options are presented

Who was the researcher behind the pasta sauce insight?

Howard Moskowitz

What is arbitrary coherence from Predictably Irrational?

The idea that initial values are set arbitrarily but future judgments become consistent relative to them

What does “arbitrary” mean in arbitrary coherence?

The starting value or anchor is random or not based on inherent worth

What does “coherent” mean in arbitrary coherence?

Later decisions are logically consistent with the initial anchor

How does the black pearl example illustrate arbitrary coherence?

Black pearls were made valuable through marketing (arbitrary), then consistently judged as luxury items (coherent)

What is the tragedy of the commons?

A situation where individuals acting in self-interest overuse a shared resource, harming everyone

Why does the tragedy of the commons occur?

Individuals prioritize personal gain while the costs are shared by the group

Give one real-world example of the tragedy of the commons

Overfishing occurs because individuals maximize catch while depleting the shared fish population

The brain damage study suggests that:

Emotional deficits lead to poorer real-world decisions

Social norms vs. market norms differ in that:

Mixing them can reduce prosocial behavior

Advanced directives are associated with

Improved quality of life and less unwanted intervention