Emotions
Explain "hedonic relativism"!
(hint: happiness set point)
Most individuals have a stable happiness set point, which largely determines their emotional state. Good and bad experiences result in only modest fluctuations upwards and downwards.
In which field was Daniel Kahneman awarded the Nobel Prize?
Economics
Explain the diversification bias OR give an example!
When making several decisions at once, we tend to diversify more than when making the same decisions sequentially.
Example: snacks at future class meetings
Why are emotions relevant when making decisions?
- Goal of decision-making: consequences that make us happy
- Fast emergency response system
Explain reference dependence according to prospect theory!
In Prospect Theory, reference dependence refers to the idea that people evaluate outcomes as gains or losses relative to a specific reference point, rather than in absolute terms.
State 2 evaluation heuristics!
- Remembered past experiences
- Simulation of future experiences
- Calculation heuristics
Good things satiate and bad things escalate: Draw the corresponding three functions on the blackboard (positive evaluation, negative evaluation, overall evaluation)!
Let's see!
One investment offers a guaranteed return of 5%, while another offers a 25% chance of a 25% return and a 75% chance of no return. Which investment is preferred by most people and why?
Most people would prefer the investment with a guaranteed 5% return due to risk aversion, as Prospect Theory suggests that individuals are more sensitive to potential losses than equivalent gains.
Explain the bias "non-regressive prediction"!
We expect more extreme emotions than we actually experience.