In order to make good decisions, we use our knowledge and our reasoning. Often, this knowledge and reasoning is sound and solid. However, sometimes, we are swayed by biases or by others manipulating a situation. For example, let’s say you and three friends wanted to rent a house and had a combined target budget of $1,600. The realtor shows you only very run-down houses for $1,600 and then shows you a very nice house for $2,000. Might you ask each person to pay more in rent to get the $2,000...

Researchers have tested many persuasion strategies, including the foot-in-the door and the door-in-the-face techniques, in a variety of contexts. Ultimately, the principles are effective in selling products and changing people’s attitude, ideas, and behaviors (Cialdini & Goldstein, 2004).

Imagine an asset price that crashes to a low point, rebounds sharply as bargain-hunters step in, and then gradually declines. Such behavior can be modeled with a smooth function whose turning points represent locally overvalued and undervalued regions. A convenient example that captures rebound followed by decay is:The high and low points of this curve are identified using the first derivative test, which determines where the function changes from increasing to decreasing or vice versa. To...

A cumulative frequency distribution is another type of frequency distribution. Instead of reporting how many data values fall in some classes, it reports how many data values are contained in either that class or any class to its left. Technically, it means the sum of frequencies of the class and all the classes below it in a frequency distribution. A cumulative frequency is calculated by adding the frequency of each class lower than the corresponding class interval or category. In general, a...