The Mind and Heart of the Negotiator, 5e (Thompson)
Appendix 1: Are You a Rational Person? Check Yourself
1) Rational models serve a diagnostic purpose to negotiators.
Answer: TRUE
Explanation: Rational models serve a useful diagnostic purpose because they often
reveal where negotiators make mistakes.
Page Ref: 329
Difficulty: Easy
Classification: Conceptual
2) You are going to buy an apartment in Alaska. You have to choose between eleven
different proposals. This decision making scenario is an example of a risky choice.
Answer: FALSE
Explanation: Riskless choice, or decision making under certainty, involves choosing
between two or more readily available options. Here, the options are readily available to
you and hence it is a riskless choice.
Page Ref: 330
AACSB: Analytic skills
Difficulty: Moderate
Classification: Application
3) Decision making under uncertainty refers to a decision making situation where only
the probabilities of events are known.
Answer: FALSE
Explanation: Decision making under uncertainty refers to decision making when the
alternatives are uncertain or unknown. In such situations, the decision maker has no idea
about the likelihood of events.
,Page Ref: 332
Difficulty: Easy
Classification: Conceptual
4) Expected utility theory is a theory of choices made by an individual actor.
Answer: TRUE
Explanation: EU is a theory of choices made by an individual actor. It prescribes a
theory of "rational behavior."
Page Ref: 334
Difficulty: Easy
Classification: Conceptual
,5) According to the expected utility theory, we need to be able to compare everything to
be truly rational.
Answer: TRUE
Explanation: A key assumption of EU is that everything is comparable. That is, given
any two objects, a person must prefer one to the other or be indifferent to both; no two
objects are incomparable.
Page Ref: 334-335
Difficulty: Moderate
Classification: Conceptual
6) The betweenness axiom asserts that gambles that have prizes about which people are
indifferent are interchangeable.
Answer: FALSE
Explanation: The betweenness axiom asserts that if x is preferred to y, then x must be
preferred to any probability mixture of x and y, which in turn must be preferred to y.
Page Ref: 336
Difficulty: Easy
Classification: Conceptual
7) The observed reluctance to pay to play a game, despite its objective attractiveness, is
known as the St. Petersburg paradox.
Answer: TRUE
Explanation: The observed reluctance to pay to play a game, despite its objective
attractiveness, is known as the St. Petersburg paradox.
Page Ref: 339
Difficulty: Easy
Classification: Conceptual
8) If a person's utility function is convex, his or her decisions will be risk-neutral and
, identical to those predicted by expected value maximization.
Answer: FALSE
Explanation: If a person's utility function is convex, he or she will choose the risky
option.
Page Ref: 341
Difficulty: Easy
Classification: Conceptual
9) According to the regressiveness principle, extreme values of some quantity deviate to a
large extent from the average value of that quantity.
Answer: FALSE
Explanation: According to the regressiveness principle, extreme values of some quantity
do not deviate very much from the average value of that quantity.
Page Ref: 343
Difficulty: Easy
Classification: Conceptual
Appendix 1: Are You a Rational Person? Check Yourself
1) Rational models serve a diagnostic purpose to negotiators.
Answer: TRUE
Explanation: Rational models serve a useful diagnostic purpose because they often
reveal where negotiators make mistakes.
Page Ref: 329
Difficulty: Easy
Classification: Conceptual
2) You are going to buy an apartment in Alaska. You have to choose between eleven
different proposals. This decision making scenario is an example of a risky choice.
Answer: FALSE
Explanation: Riskless choice, or decision making under certainty, involves choosing
between two or more readily available options. Here, the options are readily available to
you and hence it is a riskless choice.
Page Ref: 330
AACSB: Analytic skills
Difficulty: Moderate
Classification: Application
3) Decision making under uncertainty refers to a decision making situation where only
the probabilities of events are known.
Answer: FALSE
Explanation: Decision making under uncertainty refers to decision making when the
alternatives are uncertain or unknown. In such situations, the decision maker has no idea
about the likelihood of events.
,Page Ref: 332
Difficulty: Easy
Classification: Conceptual
4) Expected utility theory is a theory of choices made by an individual actor.
Answer: TRUE
Explanation: EU is a theory of choices made by an individual actor. It prescribes a
theory of "rational behavior."
Page Ref: 334
Difficulty: Easy
Classification: Conceptual
,5) According to the expected utility theory, we need to be able to compare everything to
be truly rational.
Answer: TRUE
Explanation: A key assumption of EU is that everything is comparable. That is, given
any two objects, a person must prefer one to the other or be indifferent to both; no two
objects are incomparable.
Page Ref: 334-335
Difficulty: Moderate
Classification: Conceptual
6) The betweenness axiom asserts that gambles that have prizes about which people are
indifferent are interchangeable.
Answer: FALSE
Explanation: The betweenness axiom asserts that if x is preferred to y, then x must be
preferred to any probability mixture of x and y, which in turn must be preferred to y.
Page Ref: 336
Difficulty: Easy
Classification: Conceptual
7) The observed reluctance to pay to play a game, despite its objective attractiveness, is
known as the St. Petersburg paradox.
Answer: TRUE
Explanation: The observed reluctance to pay to play a game, despite its objective
attractiveness, is known as the St. Petersburg paradox.
Page Ref: 339
Difficulty: Easy
Classification: Conceptual
8) If a person's utility function is convex, his or her decisions will be risk-neutral and
, identical to those predicted by expected value maximization.
Answer: FALSE
Explanation: If a person's utility function is convex, he or she will choose the risky
option.
Page Ref: 341
Difficulty: Easy
Classification: Conceptual
9) According to the regressiveness principle, extreme values of some quantity deviate to a
large extent from the average value of that quantity.
Answer: FALSE
Explanation: According to the regressiveness principle, extreme values of some quantity
do not deviate very much from the average value of that quantity.
Page Ref: 343
Difficulty: Easy
Classification: Conceptual
