Our discussions

Two economists, Danny and Amos have worked on theories about choice. they have found out that when they ask the question : -        Would you prefer a 100% chance to win 500$ -        Or a 50% chance to win 1000$ ? People choose the sure bet. However, when they reverse the question, and they ask about the losses , people don’t make the same choice and they become risk-seekers .  Danny and Amos forgot their first theory very quickly to focus on that new one: people respond to probability not only with reason, but also with emotions , and that this emotion is stronger when the odds are far. Fox ex : if there is 1 in a billion chances, people will consider it as it was actually 1 in 10 000 chances. This explains lotery tickets.  They developed this theory around 1975.  They presented their theory at a conference in Jerusalem and were asked : what is a loss ? They c...

I found this article about the prospect theory and I think those paragraphs sum up well the different principles: Prospect theory, a theory about how people make choices between different options or prospects, is designed to better describe, explain, and predict the choices that the typical person makes, especially in a world of uncertainty. Prospect theory is characterized by the following: Certainty:  People have a strong preference for certainty and are willing to sacrifice income to achieve more certainty. For example, if option A is a guaranteed win of $1,000, and option B is an 80 percent chance of winning $1,400 but a 20 percent chance of winning nothing, people tend to prefer option A. Loss aversion:  People tend to give losses more weight than gains — they’re loss averse. So, if you gain $100 and lose $80, it may be considered a net  loss  in terms of satisfaction, even though you came out $20 ahead, because you’ll tend to focus on how muc...

GROUP DISCUSSION Chapter 14: In this group, we feel like we have not neglected base rates in our academical career, as we have chosen a path that has lots of outcomes, compared to being a musician or an actor for instance Chapter 12 : An example of availability heuristic is if several of your school friends in the last year come from the same place, you will believe there are more and more people coming from this place, even though this could just be random. Another example would be terrorism. As in France we have been struck in this last decade, we feel like terrorism has increased lately, whereas it hasn’t, the thing is that terrorism was just further away from us before. 

 

Our brain interact with 2 systems : system 1 and system 2, as discussed in the previous article.  This article outlines the link between brain and words, that not only our mind react, but also our body unconsciously.  There is a link that is been made between your brain and words. When you hear 2 words, you connect them for a short time, your body reacts, it triggers memories, and then unlinked them.  For example if i tell you do not think about an elephant , first thing you’ll do is thinking about an elephant. If I tell you : vomit & banana , you'll link them, have an unpleasant image in your mind, your face will react as well, and in few second, your mind will unlink those 2 words.  YOU THINK WITH YOUR BODY NOT ONLY WITH YOUR BRAIN Some words have a connotation because things have always been that way. Seeing a spider will make you feel uncomfortable, because 99% of the population does, and it has always been that way.  ...

How do we think ? What is the first impression we get when we read a sentence or when we first meet a new person ? Studies show that when we read a sentence that begins end ends by letters we are more likely to believe that the middle content letters as well. It is the same for numbers, we are more likely to believe the middle is numbers. But, sometimes it is not the case. Here, we can believe it is ABC or A13C. In the second one it is 121314 but it could be 12B14. So, our first impression is different than second. This is System 1. When we meet a new person and we discuss with him, we can believe he is nice. If somebody ask us, do you think this person gives money to charity ? We can believe alright, this person is nice so he may give money to charities. But we are not sure, no proof. If we start the description of somebody by a good adjectives, people are more likely to have a good opinion . of the person. If we start by a bad they are more likely to have a bad one. Wh...

System 1 and System 2

A great article that sums up very well the science of availability:  https://www.verywellmind.com/availability-heuristic-2794824 " When you are trying to make a decision, a number of related events or situations might immediately spring to the forefront of your thoughts. As a result, you might judge that those events are more frequent or probable than others. You give greater credence to this information and tend to overestimate the probability and likelihood of similar things happening in the future." "Faced with the need for an immediate decision, the availability heuristic allows people to quickly arrive at a conclusion." "Heuristics play an important role in how we make decisions and act upon information in the world around us. The availability heuristic can be a helpful tool, but it is also important to remember that it can sometimes lead to incorrect assessments."

The science of availability  Availability heuristic = the process of judging frequency by “the ease with which instances come to mind”. Both systems are involved. It is a heuristic of judgement which substitutes one question for another: you wish to estimate the size of a category/frequency of an event, but you report an impression of the ease with which instances come to mind. It is indeed a systematic error which can lead to biases. How to realize that it creates a bias? You have to make a list of factors that are not frequency that make it easy to come up with instances. Each of these factors will be a potential source of bias. Examples: è   A striking event will be easily be remembered. Divorces among Hollywood celebrities and sex scandals among politicians attract a lot of attention. Indeed, you will have many examples of it. Therefore, you will be likely to exaggerate the frequency of Hollywood divorces and political sex scandals è ...