# Summary: Jdm

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## Read the summary and the most important questions on JDM

• ### 2 LOSS AVERSION FRAMING OF DECISIONS

This is a preview. There are 7 more flashcards available for chapter 2

• #### Which to types of decisions are there?

Major reflective decisions & Low level decisions
• #### WHAT FACTORS SHOULD AFFECT A DECISION?

1. What you want & avoid
2. Preference?
3. What factors or events will affect whether the outcome will be good, mediocre or bad, and to what degree?
4. How likely are the different possibilities?
• #### What assumptions does the Rational Decision Making Process make? (5)

– Assumes the decision maker is rational
– Assumes the problem is clear and unambiguous
– Assumes the decision maker has complete information
– No time or cost constraints
– Choice will be one with the maximum payoff
• #### What is the NORMATIVE DECISION ANALYSIS? (5)

• Enumerate options
• Enumerate outcomes
• Construct a decision analysis for the decision
• Evaluate the probabilities of different possible outcomes
• Determine which option has the greatest "expected utility.”
• #### What is the framing effect?

The framing effect is when our decisions are influenced by the way information is presented.
• #### How do people think about uncertain events?

• Gambles have two components:
1. Probability, p
2. Value, v
• The expected value of a gamble (EV) = p x v
• #### What is the Dominance Principle?

Alternative gambles can be ranked from best to worst in terms of expected value.
• #### What kind of utility from prospects? Risky/Sure

Gains: utility from risky and sure close together
Losses: utility from risky and sure bigger distance
• #### What is the Pseudo certainty effect?

The potential “certainty” in problem 2 is contingent upon reaching the second stage of the game (still uncertain)
• ### 3 MENTAL ACCOUNTING

This is a preview. There are 13 more flashcards available for chapter 3