PHI2100 Final Exam Study Guide What is an argument An argument is a connected series of statements referred to as premises that are intended to give reasons to believe some further statement conclusion is true Validity Soundness In order for an argument to be valid all the premises must be true and then the conclusion is true If one of the premises are false the conclusion is false In order for an argument to be sound it must be valid and all the premises must be true When it fulfills these criteria the argument is true Deductive vs Inductive arguments Deductive arguments attempt to be valid Inductive arguments attempt to be strong All Woman cook Sue is a woman Sue cooks Sue is a Woman Most women clean Sue cleans Descriptive Theory Describes what you in fact do Prospect theory Humans Prescriptive Theory Tells you what you ideally should do Expected utility Econs Expected Utility Theory The weighted average of all possible outcomes under certain circumstances with the weights being assigned by the likelihood or probably that any particular event Comparing the utilities of two states assesses the utility of gain That people make decisions based on the potential value of losses and gains rather than the final outcome and that people evaluate these losses and gains using certain will occur Prospect Theory heuristics The focus is on gains and losses not states Evaluation is relative to a neutral reference point A principle of diminishing sensitivity in a variety of dimensions Loss aversion The two curves are not symmetrical The response to losses is stronger than the response to gains lose aversion Lose Aversion People s tendency to strongly prefer avoiding losses to acquiring gains Losses loom larger than gains Endowment effect People tend to put more value on something they own cherish We can combat the endowment effect by thinking like a trader Ask yourself How much do I want to have X compared with other The asymmetry between the pleasure of getting and the pain of giving things I could have instead up in irrelevant Possibility Effect deserve Causes highly unlikely outcomes to be weighted disproportionately more than they We tend to overweight small risks Willing to pay far more than expected value to eliminate them altogether Improbable outcomes are overweighed Ex 5 risk of amputation Certainty Effect justifies Outcomes that are almost certain are given less weight than their probability Overweighting of small probabilities increases the attractiveness of both gambles and insurance policies Outcomes that are almost certain are underweighted relative to actual certainty Ex 95 risk of disaster Denominator neglect the focus on the number of times a target event has happened numerators without consideration of the overall number of opportunities for it to happen denominators Ex 0 001 risk of permanent disability vs 1 of 100 000 permanently disabled Low probability events are much more heavily weighted when described in terms of relative frequencies than when stated in more abstract terms of chances risk or probability Mental accounting the theory purports individuals assign different levels of utility to each asset group which affects their consumption decisions and other behaviors Ex 2 sports fans get tickets to s game One bought the ticket while the other got his for free A blizzard is supposed to come Which fan is more likely to brave the blizzard to see the game To avoid mental accounting Imagine you always pay in cash Consider big purchases in terms of their components and assess each component Wait before spending found money Imagine all your money is hard earned money Sunk Costs costs that are already paid Costs are already gone and can not be regained Ignoring sunk costs can cause others to pass negative judgments about you that may be future reputation costs Sunk cost fallacy Honoring costs that have already been paid The decision to invest additional resources in a losing account when better investments are available Framing effect people react to a particular choice in different ways depending on whether it is presented as a loss or as a gain Current racism and sexism occurs in the labor market and is at least a partial cause of the differences but not necessarily the sole cause An explicit bias is a conscious voluntary or publicly endorsed attitude An implicit bias is a non conscious non voluntary and often unknown attitude
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