2016 - 19th Annual Steven Galovich Memorial Student Symposium

Presentation Title

The Power of Information: how behavior is affected by unexpected outcomes

Student Presenter(s) and Advisor

Ned Yonkers, Lake Forest CollegeFollow

Location

Library First Floor

Abstract

Abstract: Prospect Theory is a theory of how people look at and make decisions which have some risk involved. This paper uses the implications of Prospect Theory to investigate how utility and decision-making behavior is affected by surprise outcomes compared to expected outcomes. Based on Prospect Theory, this paper hypothesizes that unexpected outcomes yield greater utility or disutility compared to expected outcomes due to expectations-based reference points. The current model of Prospect Theory will be modified to account for the effect that surprise of a prior outcome has on how an individual views subsequent choices. Data is collected from undergraduate students at Lake Forest College. The paper discusses policy implications in financial markets as well as considerations for decision making in every-day life.

Presentation Type

Individual Presentation

Start Date

4-5-2016 9:00 AM

End Date

4-5-2016 10:15 AM

Panel

Decision Making in Financial Markets and Consumption

Panel Moderator

Carolyn Tuttle

Field of Study for Presentation

Economics

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Apr 5th, 9:00 AM Apr 5th, 10:15 AM

The Power of Information: how behavior is affected by unexpected outcomes

Library First Floor

Abstract: Prospect Theory is a theory of how people look at and make decisions which have some risk involved. This paper uses the implications of Prospect Theory to investigate how utility and decision-making behavior is affected by surprise outcomes compared to expected outcomes. Based on Prospect Theory, this paper hypothesizes that unexpected outcomes yield greater utility or disutility compared to expected outcomes due to expectations-based reference points. The current model of Prospect Theory will be modified to account for the effect that surprise of a prior outcome has on how an individual views subsequent choices. Data is collected from undergraduate students at Lake Forest College. The paper discusses policy implications in financial markets as well as considerations for decision making in every-day life.