In economics, game theory, and decision theory the expected utility hypothesis is a hypothesis concerning people’s preferences with regard to choices that have uncertain outcomes (gambles). This hypothesis states that if specific axioms are satisfied, the subjective value associated with an individual’s gamble is the statistical expectation of that individual’s valuations of the outcomes of […]
Monthly Archives: September 2015
Heuristics in Decision Theory
One method of decision-making is heuristic. The heuristic approach makes decisions based on routine thinking. While this is quicker than step-by-step processing, heuristic decision-making opens the risk of inaccuracy. Mistakes that otherwise would have been avoided in step-by-step processing can be made. One common and incorrect thought process that results from heuristic thinking is the […]
Complex Decisions
Other areas of decision theory are concerned with decisions that are difficult simply because of their complexity, or the complexity of the organization that has to make them. Individuals making decisions may be limited in resources or are boundedly rational. In such cases the issue is not the deviation between real and optimal behaviour, but […]
Other-regarding preferences (social preferences)
Also called social preferences. In decisions which affect others, people will sometimes give up some direct personal benefit or take on a cost in order to achieve a fair or equal outcome. Bolton and Ockenfels (2000) and Fehr and Schmidt (1999) explore decision-makers who are concerned with fairness of distributions and have disutility from others’ […]
Interaction of decision makers
Some decisions are difficult because of the need to take into account how other people in the situation will respond to the decision that is taken. The analysis of such social decisions is more often treated under the label of game theory, rather than decision theory, though it involves the same mathematical methods. From the […]
Intertemporal Choice
Intertemporal choice is concerned with the kind of choice where different actions lead to outcomes that are realized at different points in time. If someone received a windfall of several thousand dollars, they could spend it on an expensive holiday, giving them immediate pleasure, or they could invest it in a pension scheme, giving them […]
Choice Under Uncertainty (Expected Value)
This area represents the heart of decision theory. The procedure now referred to as expected value was known from the 17th century. Blaise Pascal invoked it in his famous wager (see below), which is contained in his Pensées, published in 1670. The idea of expected value is that, when faced with a number of actions, […]
Eliciting Subconcious Responses
Become a master communicator by learning to recognize and utilize subtle changes in others’ physiology. This technique involves the valuable skill of eliciting subconscious resources, a skill that serves you best when it, too, is subconscious. This skill deserves serious study, so resist any temptation to treat it like a magic trick. We recommend that you […]
As-If Pattern
Create useful states by envisioning excellence. It is a way to use imagination for success in the spirit of Milton Erickson’s famous quote, “You can pretend anything and master it. This is an important skill for using modeling to achieve excellence and success. An excellent first step in modeling is to place yourself into the […]
Exchanged Matches
Not all your mirroring has to use the same parts of the body, just as your symbolic mirroring does not necessarily use exactly the same words. For example, NLP teaches that you can make a motion such as finger taps that match the rhythm of the breath, rather than breathing to the breath timing yourself. […]