IMS555 - Chapter 9

What is the principle of Expected Utility Theory that defines a rational decision maker?

• Dominance

• Independence

• Transitivity

• Completeness

Who published research in 1979 that led to the widespread acceptance that Expected Utility theory is a false descriptive hypothesis?

• Kahneman and Tversky

• Simon

• May

• Loomes and Taylor

Which alternative theory to Normative Decision Theory indicates that people fear losses more than they value gains?

• Prospect Theory

• Bounded Rationality

• Anchoring Heuristic

• Judgmental Heuristics

According to Descriptive Decision Theory, what does it take into account when explaining how people make decisions?

• Unrealistic assumptions

• People's limitations

• Optimal decision-making

• Strict logic

What did Loomes and Taylor (1992) observe about the preferences of 306 respondents in a lottery scenario involving tickets 1-30, 31-60, and 61-100?

• B>C, A>B, C>A

• C>A, A>B, B>C

• A>B, B>C, C>A

• B>A, C>B, A>C

Which heuristic involves people making decisions based on rules of thumb and anchoring their thoughts to a reference point?

• Anchoring Heuristic

• Judgmental Heuristics

• Bounded Rationality

• Prospect Theory

What did the study by Kahneman and Tversky (1979) reveal about people's preference for certainty in decision-making?

• They avoid certain outcomes

• They give greater weight to certain outcomes

• They weigh uncertainty more heavily

• They ignore probabilities

In the lottery scenario involving tickets 1-30, 31-60, and 61-100, what percentage of respondents stated cyclic preference orderings?

• 40%

• 30%

• 21.6%

• 15%

What is the main purpose of Descriptive Decision Theory?

• To ignore people's limitations

• To explain how people actually make decisions

• To develop optimal decision models

• To criticize normative theories

Which principle of Expected Utility Theory was violated in the study by Kahneman and Tversky involving prospects A, B, C, and D?

• Completeness

• Dominance

• Transitivity

• Independence