Irrationally Influenced Rational Decisions
How do we make decisions when the outcomes are uncertain?
One possible way would be to calculate the expected value of each option by multiplying each possible outcome amount by its probability and then choosing the option with the highest expected value.
While this strategy would maximize the payoff in expectation, this is not what we tend to do. In particular, we seem to be irrationally influenced by past outcomes of our decisions when making subsequent choices.
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Do we know the odds or do we like the odds?
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