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Decision Making: P-value Method01:09

Decision Making: P-value Method

The process of hypothesis testing based on the P-value method includes calculating the P- value using the sample data and interpreting it.
First, a specific claim about the population parameter is proposed. The claim is based on the research question and is stated in a simple form. Further, an opposing statement to the claim  is also stated. These statements can act as null and alternative hypotheses:  a null hypothesis would be a neutral statement while the alternative hypothesis can have a...
Reason and Intuition01:37

Reason and Intuition

The human brain processes information for decision-making using one of two routes: an intuitive system and a rational system (Epstein, 1994; popularized by Kahneman, 2011 as System 1 and System 2, respectively). The intuitive system is quick, impulsive, and operates with minimal effort, relying on emotions or habits to provide cues for what to do next, while the rational system is logical, analytical, deliberate, and methodical. Research in neuropsychology suggests that the brain can only use...
Decision Making: Traditional Method01:14

Decision Making: Traditional Method

The process of hypothesis testing based on the traditional method includes calculating the critical value, testing the value of the test statistic using the sample data, and interpreting these values.
First, a specific claim about the population parameter is decided based on the research question and is stated in a simple form. Further, an opposing statement to this claim is also stated. These statements can act as null and alternative hypotheses, out of which a null hypothesis would be a...
Decision Making01:20

Decision Making

Decision-making is a fundamental cognitive process that involves evaluating alternatives and selecting among them. This process can range from simple choices, such as deciding what to wear, to complex decisions, like choosing a major in college or a career path. The complexity of the decision often dictates the approach we use, which can be broadly categorized into two types: automatic and controlled decision-making.
Automatic decision-making is fast, intuitive, and relies on gut feelings...
Rational Expressions01:28

Rational Expressions

Rational expressions are algebraic fractions in which both the numerator and the denominator are polynomials. These expressions follow the arithmetic rules of numerical fractions but require extra care due to the presence of variables. A fundamental part of working with rational expressions is identifying values that make the expression undefined, typically those that result in division by zero or undefined radicals.Determining the DomainThe domain of a rational expression includes all real...
Routh-Hurwitz Criterion II01:19

Routh-Hurwitz Criterion II

In the application of the Routh-Hurwitz criterion, two specific scenarios can arise that complicate stability analysis.
The first scenario occurs when a singular zero appears in the first column of the Routh table. This situation creates a division by zero issues. To resolve this, a small positive or negative number, denoted as epsilon (∈), is substituted for the zero. The stability analysis proceeds by assuming a sign for ∈. If ∈ is positive, any sign change in the first column of the Routh...

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Related Experiment Video

Updated: Jul 18, 2026

Measuring the Subjective Value of Risky and Ambiguous Options using Experimental Economics and Functional MRI Methods
13:04

Measuring the Subjective Value of Risky and Ambiguous Options using Experimental Economics and Functional MRI Methods

Published on: September 19, 2012

A rational decision rule with extreme events.

Marcello Basili1

  • 1Department of Economics, University of Siena, Piazza San Francesco 7 53100 Siena, Italy. basili@unisi.it

Risk Analysis : an Official Publication of the Society for Risk Analysis
|December 23, 2006
PubMed
Summary

Decision-makers can now navigate risks from extreme events using a novel approach. This method accounts for both extreme outcomes and expected results, enhancing decision-making under uncertainty.

Area of Science:

  • Decision theory
  • Risk management
  • Behavioral economics

Background:

  • Extreme events pose unique challenges due to low/ambiguous probabilities and severe consequences.
  • Existing decision-making frameworks struggle to adequately address these extreme risks.
  • Understanding decision-maker behavior under uncertainty is crucial for effective risk management.

Purpose of the Study:

  • To develop a new functional for decision-making under extreme events.
  • To represent decision-maker behavior facing both risky and extreme events.
  • To formalize the precautionary principle (PP) within a new decision-making framework.

Main Methods:

  • Utilized a novel functional mimicking the restricted Bayes-Hurwicz criterion.
  • Employed the Choquet expected utility approach.

Related Experiment Videos

Last Updated: Jul 18, 2026

Measuring the Subjective Value of Risky and Ambiguous Options using Experimental Economics and Functional MRI Methods
13:04

Measuring the Subjective Value of Risky and Ambiguous Options using Experimental Economics and Functional MRI Methods

Published on: September 19, 2012

  • Developed a functional encompassing extreme outcomes and expectation of all possible results.

    • Main Results:

    • A new functional successfully represents decision-maker behavior for both risky and extreme events.
    • The proposed functional integrates extreme outcomes with expected values.
    • A novel formalization of the precautionary principle (PP) is presented.

    Conclusions:

    • The new functional provides a robust tool for analyzing decisions involving extreme risks.
    • This approach enhances the understanding of decision-making under uncertainty and ambiguity.
    • The formalized precautionary principle offers a structured way to manage extreme event risks.