Expected Value Theory in Decision Making

24sec Snip

00:00

Play full episode

Summary

Transcript

Episode notes

According to the expected value theory, individuals make decisions based on the potential outcomes and their associated probabilities. In this theory, rational individuals would consider the probability of winning or losing before taking a risk. In situations like a 50-50 coin flip with outcomes of winning 750 rupees or losing 500 rupees, individuals might perceive it as worth trying because the potential gain is higher than the potential loss.

Daniel Kahneman passed away on 27th March and your LinkedIn feed is probably filled with people telling you why Kahneman’s book “Thinking, Fast and Slow” is the best book ever written.

And there’s no denying it’s a great book. But it also draws heavily from the research he conducted in the preceding decades. Research that won Daniel Kahneman, a psychologist with no formal training in economics, the Nobel Prize in Economics in 2002. So in today’s Finshots, we thought we’d talk about what led to him winning the prestigious award.

Also, a quick side note. If you're someone who has great communication skills and are looking to join a dynamic team, Ditto is recruiting new Insurance Advisors. You don't even have to know much about Insurance -- We will train you from scratch and you can enjoy working remotely with a great team. Click this link to apply - bit.ly/48WX5za