Study Guide Comm 402 Spring 2012 Exam 2 Please note This is not an exhaustive review You are responsible for knowing everything that was gone over in the text chapters discussion sections and lectures Lave March Chapter 4 1 What is the choice process being modeled in this chapter Idenitify all possible outcomes for each option a Examine all possible plans options b c Value each outcome you have identified d Estimate the probability of each outcome e Choose the outcome with the highest expected value 2 How do you calculate Expected Value EV a EV PiVi b For all possible outcomes i c Sum of all the products of P and V 3 What is the numerical range of probability Why is probability limited to these numerical values a 0 to 1 b Measure in decimals or percentages can t have more than 100 chance of something happening can t have less than 0 chance of something happening 4 What are the two common mistakes people make when they apply probabilities in their decisions a Assuming all outcomes are equally likely lottery assuming 50 50 b Gambler s fallacy thinking you re due for something 5 How do you draw a decision tree How do you use a decision tree to choose a Shows all possible plans choices and outcomes as well as probabilities and values for each 6 How can a decision tree be simplified a Working right to left multiplying to simplify values 7 What rule do you use to determine i e predict the best choice in this model a Whatever option has the largest calculate EV 8 How do you predict the last choice a Lowest calculated EV 9 What is utility How do you obtain it How is it measured a Subjective value amount of perceived happiness b Measured in utils c Maximizing expected value will give you utility 10 How do you build Subjective Expected Utility SEU models a Using utils rather than money 11 What s the difference between normative and descriptive models 12 What is aggregation a Putting things together 13 What is the Law of Large Numbers a Normative model for predictions b Assumes that errors are random and cancel out with a large enough sample 14 How is risk defined Why is it important a At least one choie has punishing consequences instead of one just being b more attractive than the other It s important because having consequences if you choose wrong will affect how you go about choosing in the first place 15 Understand how to assign probability values within the decision trees including decision trees that have sub branches 16 Understand the examples given in this chapter e g raisins and wine grapes value of voting Make sure you can generate all the calculated numbers 17 How do you model draw a decision tree for different situations e g decisions under risk the case of insurance decisions without perfect information decisions with unknown values or probabilities etc a Without values probabilities do not need to calculate utility simply need to understand what makes up utility for given choice b With Insurance start with how much you re guaranteed 3work down to how much you could owe 18 What are the assumptions of the choice model pp 137 138 a An individual has a list of alternatives from which he chooses b An individual can draw a map of consequences of each alternative c An individual can attach a value to each outcome d An individual can specify the probability of any particular outcome given the choice of any particular alternative e An individual chooses among the alternative given by maximizing expected value 19 What is a contingent choice a Outcome depends on other party b Football play example 20 How does the choice model work when the other party is taken into consideration e g known probabilities of the other party unknown probabilities of the other party etc etc a First possibility you know the probabilities for each of other party s actions i Note this implies that other party isn t reactive to you doesn t learn etc Poor comm model ii Anyway just multiply probabilities and outcomes together and choose the thing with maximum EV Illustrated p 139 b Second possibility we don t know in advance other party s probabilities but the outcome matrix is still accurate i Both parties are acting intelligently but both act in some ignorance of what other is doing ii Game theory economics conflict management math 21 When information is not adequate what are the possible decision rules to use a MiniMax b MaxiMax c MaxiMin d MiniRange e Maximizing EV 22 Five possible rules exist for choosing one s actions Define each one of the five rules a Maximizing EV b MaxiMax Optimistic Decision Rule i Chooses by looking at best possible outcome among alternatives c MaxiMin Pessimistic Decision Rule i Chooses alternative with least potential to harm d MiniRange Minimum Variation Rules i Chooses alternative with least amount of possible surprise e MiniMax Regret Minimum Regret Rule i Chooses alternative with least potential to make you feel bad if you choose incorrectly 23 Be familiar with the Sunnafrank study and its relation to concepts in the course a What choices people make during conversation b The reasons why people choose particular things in interpersonal communication c Whether or not your predicted outcome affects how you interact Problems to Practice Ch 4 p 144 1b p 138 football example Chapter 5 1 What is the difference between internal and external exchange a Internal one party decides between two things i Ex Do I want to buy shoes or a shirt Do I want a cheeseburger or to keep my three dollars b External one party gives something to another party to get something in return 2 What are the characteristics of marginal utility How do you calculate marginal utility a b Not total utlity after 3 cheeseburgers but what each additional It is the value of one unit added to the margin cheeseburger adds c Not fixed depends on how much of the thing you already have d Normal decreases with increasing number of things already possessed i One exception addictions e Calculated by subtracting 3 What s an indifference curve How do you draw an indifference curve a When multiple combinations of trades are available trades along the curve do not change total utility b Plot trade combinations will always be negative decelerating slopes 4 Does total utility increase or decrease when moving from origin to upper right in an indifference map a Total utility INCREASES 5 What is a consumption possibility line How do you draw a budget line in an indifference map a Budget Line b Only certain combinations of goods are