Essay On Flu Epidemic
Regret aversion bias:
People make decisions made on the anticipated risks. They don’t want to become the active agent in a wrong decision. A major study was done to understand this bias. A flu epidemic has hit your community. This flu can be fatal for children under the age of three. The probability of a child getting the flu is 1 in 10, and 1 in 100 children who get the flu will die from it. This means that, statistically speaking, 10 out of each 10,000 children in your community will die.
A vaccine for this type of flu has been developed and tested. The vaccine eliminates any chance of getting the flu. The vaccine, however, has potentially fatal side effects. Suppose that the vaccine has a 0.05% fatality rate; that is, the vaccine itself is fatal in 5 out of every 10,000 cases. You have a two-year old daughter. Will you choose to vaccinate her?
Many of the people chose NO as the answer, because they didn’t want to blame themselves for the illness and if the child caught the epidemic then it is an act of god.
Investors who have regret bias may cling to an investment made,because they don’t want to stay out when it again it increases.
Hindsight bias:
In hindsight there is a view that they knew it all along. people tend to overestimate the actual outcome by stating that it was predictable, though it …show more content…
there are two main parts of representativeness that is base-rate neglect and sample-size neglect. Base-rate fallacy is when more weight is given to present information and underweighting the prior probability. For example, the `buy’ ratings on the stocks will make people buy the stocks without doing the background work. Sample-size neglect makes an investor neglect the sample of the data and draw conclusions based in the sample (i.e representing the whole population. Some researchers call this as “law of small
People make decisions made on the anticipated risks. They don’t want to become the active agent in a wrong decision. A major study was done to understand this bias. A flu epidemic has hit your community. This flu can be fatal for children under the age of three. The probability of a child getting the flu is 1 in 10, and 1 in 100 children who get the flu will die from it. This means that, statistically speaking, 10 out of each 10,000 children in your community will die.
A vaccine for this type of flu has been developed and tested. The vaccine eliminates any chance of getting the flu. The vaccine, however, has potentially fatal side effects. Suppose that the vaccine has a 0.05% fatality rate; that is, the vaccine itself is fatal in 5 out of every 10,000 cases. You have a two-year old daughter. Will you choose to vaccinate her?
Many of the people chose NO as the answer, because they didn’t want to blame themselves for the illness and if the child caught the epidemic then it is an act of god.
Investors who have regret bias may cling to an investment made,because they don’t want to stay out when it again it increases.
Hindsight bias:
In hindsight there is a view that they knew it all along. people tend to overestimate the actual outcome by stating that it was predictable, though it …show more content…
there are two main parts of representativeness that is base-rate neglect and sample-size neglect. Base-rate fallacy is when more weight is given to present information and underweighting the prior probability. For example, the `buy’ ratings on the stocks will make people buy the stocks without doing the background work. Sample-size neglect makes an investor neglect the sample of the data and draw conclusions based in the sample (i.e representing the whole population. Some researchers call this as “law of small