Understanding Decision Making

What is loss aversion?

• Loss aversion is a financial strategy to maximize gains

• Loss aversion is a cognitive bias where people prefer avoiding losses over acquiring equivalent gains.

• Loss aversion is a term used in sports psychology

• Loss aversion is a type of investment with guaranteed returns

Explain the concept of diminishing sensitivity.

• Diminishing sensitivity refers to the reduced reaction or response to a stimulus with repeated exposure.

• Diminishing sensitivity is the increased reaction to a stimulus with repeated exposure.

• Diminishing sensitivity is a concept that only occurs in animals, not humans.

• Diminishing sensitivity is only applicable to physical stimuli, not psychological ones.

How does reference point influence decision making?

• Reference point has no impact on decision making

• Reference point only affects short-term decisions

• Reference point is only relevant in personal decisions

• Reference point serves as a benchmark against which decisions are made, influencing perceptions of gains and losses.

What is System 1 in decision making?

• System 1 is the intuitive, automatic, and fast mode of thinking.

• System 1 is the logical and analytical mode of thinking.

• System 1 is the slow, deliberate, and effortful mode of thinking.

• System 1 is the emotional and subjective mode of thinking.

Describe System 2 and its role in decision making.

• System 2 is responsible for emotional and impulsive decision-making processes.

• System 2 is responsible for analytical, logical, and deliberate decision-making processes.

• System 2 is only used in trivial decision-making scenarios.

• System 2 is primarily focused on creative decision-making processes.

Loss aversion is the tendency to prefer avoiding losses over acquiring equivalent gains. True or False?

• False

• Maybe

• Partially true

• True

Diminishing sensitivity refers to the idea that the impact of changes decreases as the magnitude of the change increases. True or False?

• False

• Maybe

• True

• Partially true

Reference point is a fixed value against which changes are measured. True or False?

• True

• Maybe

• Partially True

• False

System 1 is fast, automatic, and operates with little or no effort or voluntary control. True or False?

• Partially true

• Maybe

• False

• True

System 2 is slow, deliberate, and requires effortful mental activities. True or False?

• Maybe

• Sometimes

• True

• False