Responsibility & Other Matters

. Losses are weighted about twice as much as gains in the following situations

i) gambles

ii) endowment effect

iii) reaction to price changes

. Taboo tradeoff = where no amount of money is sufficient to change your choice, ie increasing the chance of the death of your children

. Precautionary principle = prohibits any action that might cause harm. It imposes the entire burden of proving safety on anyone who undertakes actions that might harm people or the environment. The absence of scientific evidence of potential damage is not sufficient justification for taking risks. This approach is costly and can be paralyzing. For example, some inventions that would have not passed the test include airplanes, air-conditioning, antibiotics, automobiles, chlorine, measles vaccine, open-heart surgery, radio, refrigeration, smallpox vaccine and x-rays.

. Enhanced loss aversion = the dilemma between intensely loss-averse moral attitudes and efficient risk management is complicated.

. We spend much time anticipating and trying to avoid the emotional pain we inflict on ourselves.

. Poignancy = is counterfactual feeling, like regret, that involves mechanisms of substitution and intensity matching. Usually occurs when 2+ alternatives or scenarios are seen together.

. Category-boundary impact = a change from impossibility to possibility or from possibility to certainty has a bigger impact than the comparable change in the middle of the scale.

. Pseudo-certainty effect = an event that is actually uncertain is weighted as if it were certain

"...people greatly undervalued a reduction in the probability of a hazard in comparison to the complete elimination of that hazard. Hence, insurance should appear more attractive when it is framed as the elimination of risk than when it is described as a reduction of risk..... Evidently, the subjects adopted the descriptions of the outcomes as given in the question and evaluated the outcomes accordingly as gains or losses..."

Daniel Kahneman 2012

For example,

- in framing public health statements: the changing of words from "lives saved", eg survival, to "lives lost", eg mortality, induces a marked shift of preference from risk aversion to risk seeking.

- surgery versus radiation therapy - as the former involves a risk of death during treatment, the latter is the preferred treatment.

. Without distorting or suppressing information, decision-making can be influenced by the framing of outcomes and contingencies, eg price differences between cash and credit purchases are labeled cash discounts rather than credit card surcharges, ie, gain vs loss. As losses loom larger than gains, people are less likely to accept the surcharge than forego a discount.

 

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