Study Questions for Exam #4:

In this unit we surveyed various metadecisions and "traps" related to decision making. You should be prepared to identify and analyze these various complications as they arise in story problems and also perhaps say something in general about how the traps may be avoided or when the metadecisions are particularly pressing.

A. The Value of More Information

1. The examples we worked with in detail all had to do with cases where one was able to gain some information that changed the numerical values assigned to the probabilities of various outcomes. Review the main examples.

2. Formulate some rough generalizations about when getting more information is likely to be worth the effort. (For example, does it depend on how close together the expected utilities of the two or more options are?)

3. Can there ever be situations in which it is arguably not wise to seek new information? List a few different types of case.

B. False Positives/False Negatives

4. Often having information about how likely it is that a test result is false (and therefore misleading) can be very helpful. Be able to distinguish the rate of false positives and false negatives in story problems.

5. Be able to figure out which is more harmful in particular cases.

6. Be able to write these rates as conditional probabilities.

C. Mental Accounting

7. This is generally a relatively benign idiosyncrasy of how we think about money. Give an example where it leads to irrational choice making.

8. How is mental accounting related to budgeting? How is it related to akrasia (or methods for coping with akrasia)?

D. Sunk Costs

9. This is a widely prevalent trap which can easily lead us into making the wrong choice. Become familiar with several standard examples of letting sunk costs influence a decision inappropriately.

10. Be prepared to say in words exactly what is wrong with taking sunk costs into account.

11. Be able to analyze "sunk cost" thinking in story problems.

12. Be able to analyze examples of animal behavior to see if they appear to be responding to past investment as opposed to future expected gain.

E. Overconfidence

13. Explain carefully exactly what students of rational decision theory have in mind when they discuss the trap of (epistemic) "overconfidence" and give a couple of examples of the phenomenon.

14. Psychologists have designed methods for "calibrating" people's degrees of certainty in the correctness of their own beliefs. Make sure you know how they compute calibration curves.

15. Give some generalizations about when people's degrees of certainty are apt to be too high, too low, just about right, etc. (See Plous chapter as well as lecture notes and other readings.)

16. What are some good ways of overcoming the overconfidence trap?

F. Akrasia

17. Be able to describe a few standard sorts of examples of weakness of will.

18. Be able to distinguish between genuine akrasia and examples where one is merely ignorant of the likely outcomes or changes one's preferences over time.

19. What are some ways of trying to cope with akrasia?

G. Addiction

20. In your readings, the topic of addiction came up in three different contexts: in the Dawes chapter on sunk costs, in the lecture on akrasia, and in the Plous chapter on "deterioration" traps. Are these three discussions illuminating different aspects of the addiction problem or are they really all talking about the same thing?