PSY342H1 Chapter Notes - Chapter 9: Expected Utility Hypothesis, Loss Aversion, Risk Aversion
Document Summary
Decision making involves assessment of all the courses of action available and determination of the action to take that will lead to the best consequences. A decision occurs when a person with an unfulfilled need takes an action to satisfy that need or desire and often person does that all the relevant information in hand. For all decisions two factors are critical: value of action to us, the likely outcome. One way to make a decision is to weigh out the pros and cons of each alternative. Normative/prescriptive theories are the theories that tell us what we should do. They also made use of previous actual human behaviour because it is believed that from an evolutionary point of view humans try to make the best possible rational decision. Descriptive theories focus on how we actually make decisions and not on we should make them. They work to increase the understanding of decision making.
