Decision making

• Sources of Difficulty


  • Conflict: decision maker must make tradeoffs across different dimensions
  • Uncertainty: Outcome of decision often depends on uncertain variables or events
• Availability heuristic


  People believe that things the come to mind easier are more likely to be true
• Availability heuristic


  • Would you expect a novel to have more words with "ng" or "_n"?
  • Most people would likely say the "ng" because it is a more prevalent sentence word structure and more likely to come to mind. In reality, "_n" would actually be the most common.
• Representativeness heuristic


  People believe that because a process is random, there shouldn't be a pattern
• Representativeness heuristic


  • Participants asked to pick which birth order a family has for their children: a) BBBGGG or b) GBBGBG. Most people will pick b) because it has less of a pattern, even though both options are equally likely.
• Anchoring


  People use the first piece of information they receive as an anchor and base their estimates on that, even if it is irrelevant
• Anchoring


  • Participants asked to solve complex equations in less than 5 seconds: a) 8x7x6x5x4x3x2x1 or b) 1x2x3x4x5x6x7x8. People in group a) will estimate a much higher answer than group b) even though they should produce the same value.
• Illusory correlation


  Seeing a relationship one expects to see even when no such relationship occurs
• Confirmation bias


  Tendency to search only for information that will confirm one's initial hunch or hypotheses and to overlook or ignore other information
• Overconfidence


  People often estimate they will perform much better on a task that what they actually do
• Expected Utility Theory


  Model of decision making that assumes people will choose the option that maximizes their expected utility
• Image Theory


  Model of decision making where most of the work is done during "pre-choice screening of options" by asking whether a new goal, plan, or alternative is compatible with three images: value, trajectory, and strategic
• Recognition primed decision making

  As decision makers take stock of new info, they compare to other situations they have previously encountered. Experts are more likely to rely on intuition, mental simulation, making metaphors/analogies and recalling/creating stories.
• Neuroeconomics


  Field that examines how the brain interacts with the environment to enable complex decision making, including the interplay between cognition and emotion
• Ultimatum Game


  • Opportunity to split $10 with someone, will receive a one-time offer from your partner which you can accept, or if you deny, neither of you get anything. Many people reject unfair options even though getting $2 is better than nothing, because it ensures their partner doesn't get more than them.