Problem #1:
On page 70, Plous discusses
the responses subjects give to choices between options A and B, and then
options C and D. On page 71, he compares combined choice A & D with
combined choice B & C. So he analyzes a total of six possible choices in
all, four simple and two combinations.
a) For each of these six compute its expected utility,
assuming that utility is determined by the dollar amount.
b) Now using the Prospect Theory graph above (use the
horizontal axis to represent dollar amounts and the vertical axis to represent
units of subjective value), compare the various options.
c) Does using the notion of value postulated by Prospect
Theory explain the way people respond to these various options completely or do
we still need to talk about attitudes toward probability and/or certain
outcomes?
Problem #2:
On pages 74 and 75, Plous
describes the jacket/calculator puzzle. Can one use the graph above to explain
why people feel that the difference between $15 and $10 is greater than the
difference between $125 and $120?
If so, does this resolve all the puzzlement about the example? If no, how can we understand this bit of decision behavior – or can we?
Problem #3:
The Bazerman article on "Framing" (posted on e-reserve) begins with a description of an early Tversky and Kahneman experiment concerning
the outbreak of an "unusual disease" that is expected to kill 600 people and
describes four options.
a) For each of these four compute its expected
(dis)utility, assuming that utility is determined by the number of lives lost.
b) Now using the Prospect Theory graph above (use the
horizontal axis to represent number of lives and the vertical axis to represent
units of subjective value), compare the various options.
c) Does using the notion of value postulated by Prospect
Theory explain the way people respond to these various options completely or do
we still need to talk about attitudes toward probability and/or certain
outcomes?
d) (Optional) What do you think about using this sort of
graph to compare the subject values of differing numbers of human lives?
Problem #4:
On page 99, Plous
discusses four options and describes people’s reactions to them.
a) Is Rational Choice Theory helpful in understanding
their responses? Explain briefly.
b) Does the Prospect Theory account of value (and the
above graph) explain their responses? Explain briefly.
c) Does the Prospect Theory of decision weights and the
graph on Plous, p. 98 explain their responses? Explain briefly.
d) Is it also necessary to postulate a “certainty
effect” in this case? Explain briefly.
Problem #5:
Compare the following two situations:
Situation 1: Would you volunteer to receive a vaccine that would be 50% effective in preventing a disease that is expected to afflict 20% of the population?
Situation 2: There are two mutually exclusive and equally probable strains of the disease, each of which is expected to affect 10% of the population. The vaccine offers complete protection against one strain and none against the other.
In one particular study (which gave more details about the situations), about 40% of the subjects said Yes to Situation 1, but only 57% of the respondents opted for the vaccine in Situation 2.
a)
From the perspective of
Rational Choice Theory, how do the two situations differ?
b)
Does the Prospect Theory
of value help explain the different responses to these situations? Explain.
c)
Does the Prospect Theory
of weights help explain the different responses? Explain.
d)
This illustrates the
phenomenon of “pseudocertainty”. Briefly explain.