Understanding Prospect Theory and Decision Making

What psychological concept explains why people might value a mattress more once it's in their home?

• Anchoring Effect

• Cognitive Dissonance

• Confirmation Bias

• Endowment Effect

In the coffee mug experiment, why did sellers value the mug more than buyers?

• Buyers had less money

• Buyers were not interested in mugs

• Sellers were influenced by the endowment effect

• Sellers needed the mug more

In the disease scenario, what is the main reason people choose Plan A when lives saved are emphasized?

• Plan A is mathematically superior

• Plan A is framed as a sure win

• Plan B is too complex

• Plan B is not explained well

How does the framing effect influence decision-making in risky scenarios?

• It leads to random decision-making

• It has no significant impact

• It makes people choose the option with the highest numerical value

• It causes people to focus on potential losses or gains based on wording

What is loss aversion?

• The tendency to prefer gaining over losing

• The tendency to overvalue owned items

• The tendency to avoid losses more than acquiring gains

• The tendency to make decisions based on past experiences

Why might people refuse a coin flip bet with a potential gain of $150 and a loss of $100?

• They don't like gambling

• The potential loss feels worse than the potential gain feels good

• They don't understand the odds

• The gain is not high enough

What brain region is associated with emotional reactions influencing decision-making?

• Prefrontal Cortex

• Cerebellum

• Amygdala

• Hippocampus

How does the amygdala influence decisions in the context of prospect theory?

• It calculates the expected value of outcomes

• It reacts to emotional aspects of potential losses or gains

• It suppresses emotional responses

• It enhances logical reasoning

What does prospect theory suggest about human decision-making?

• Humans always make logical decisions

• Emotions and framing can influence decisions

• Humans are indifferent to potential losses

• Decisions are based solely on mathematical calculations

What should you do if a trial mattress is uncomfortable, according to prospect theory?

• Keep it because you own it

• Return it and not get attached

• Give it away for free

• Sell it for a higher price