decision making

prescriptive approach

how should people decide?

expected value

average outcome if a scenario is repeated many times. calculated using probabilities and the value of possible outcome

prospect theory

people make decisions based on subjective utility, decision weights and relative outcomes rather than calculated expected values

diminishing marginal utility

subjective utility increases more slowly than objective value (curves so $1 and $10 is more of a difference in our heads than $1 mil and $10 mil)

loss aversion

tendency to treat losses as if they are larger than gains (eg losing $20 feels worse than gaining $20 feels good)

utility function

graphical representation of subjective utility vs objective value

how do we weight large vs small probabilities?

we underweight large probabilities (99% feels way worse than 100%) and overweight small probabilities (1% feels way better than 0%)

framing effect

manipulating frame of reference leads to different life choices. change. of wording can lead to change in answer

reinforcement learning system

if the outcome of our actions is better than expected we will repeat the actions

reward prediction error

actual reward - predicted reward

conclusion of the Iowa gambling study

good decisions depend not only on cognitions but also emotional signals

dorsal PFC

where/how?

ventral PFC

what/why?

rostral PFC

complex, abstract ideas, long timeframe

caudal PFC

simple, concrete ideas. short timeframe

medial PFC

emotion-focused

lateral PFC

cognitive focused