TD L9

• Minor changes in wording outcome as gain or loss, results in preference reversal
• power to the person presenting the effect

think of the fat in meat

attribute and goal

• loss frame - risk seeking 
• gain frame - risk averse
• risk attitudes different between gain and loss

• focuses on changes relative to reference point 
• π translates p on the weighting function
• v translates x on the value function

• V_PT = π(p₁)*v(x₁)+π(p₂)*v(x₂)+
• …+π(p_n)*v(x_n)

• under weight high probability (above 50%)
• over weight low probablity (under 20%)we misunderstand certainty

aka we act like large probabilities don't happen, and small probabilities more likely than what they are

reduction of the probability of an outcome by a constant factor has more impact when the outcome was initially certain than when it was merely probable

• asking question reveals stored preference
• can infer true preference from behaviour (choice, willingness to pay)
• preference shouldn't vary in different circumstance
• preference not influenced by how the question is asked

• construct at time and place they are asked to choose
• preference thus is unstable and subject to reversal and variation depending on context, how it was asked, and framing effects

• one part or quantity may be replaced with another equal part or quantity in the satisfaction of an obligation 
• we perceive money to be nonfungible even though it is

• we have artificial budgets aka mental accounts and pay for different things out of different budgets
• solution to constraint: limit attention and info processing capacity (set reference point to each account)
• solution to self control problems

• failure to adjust a reference point appropriately 
• instead we try to keep mental accounts open in order to balance them

• can be positive: ie gym membership to motivate to go to gym 
• negative: escalation of commitment to prior decisions

• holding on to losing stock (in vain) in hopes that it will go back up 
• people hold on to losers and sell winners

last race of the day sees more bets on long shots

• choice attributes framed to emphasize different things focus on good or bad
• not rational 
• some think it emphasises different info rather than present identical choice and thus trigger different assumptions about options

• purpose of behaviour framed to emphasize different things
• which goal should be guiding your decision