Chapter 01

Question 1

Judgment refers to

Answer 1

the cognitive aspects of our decision-making process

Question 2

Identify the six components of the decision-making process

Answer 2

1. Define the Problem
2. Identify the Criteria
3. Weigh the Criteria
4. Generate Alternatives
5. Rate each alternative on each criteria
6. Compute the Optimal Decision

Question 3

What type of thinking is used when an intuitive system of thinking is used

Answer 3

System 1 - typically fast, automatic, effortless, implicit, and emotional

Question 4

What type of thinking is used when a logical system of thinking is used

Answer 4

System 2 typically uses slower, conscious, effortful, explicit, and logical reasoning.

Question 5

Should System 2 only be used for decision-making? Why?

Answer 5

No, System 1 can be efficient at times (while shopping for groceries), but System 2 should be used for our most important decisions (buying a car)

Question 6

When do people tend to use System 1 decision-making?

Answer 6

People rely on it when they are busy, rushed, or have other things on their minds.

Question 7

What is the term used when referring to the decision-making process that is logically expected to lead to optimal results, given an accurate assessment of the decision-maker’s values & risk preferences?

Answer 7

rationality

Question 8

Herbert Simon suggested individual judgment is bound in its rationality & we can better understand decision-making by?

Answer 8

…describing and explaining actual decisions rather than focusing solely on prescriptive (“what would rationally be done”) decision analysis

Question 9

What are the two fields of decision-making implied by Simon’s work?

Answer 9

Prescriptive models and the study of prescriptive models.
* Mathematical model to help decision-makers act more rationally
* descriptive decision researchers consider how decisions are actually made

Question 10

What model of decision-making do we study in this course?

Answer 10

Prescriptive approach

Question 11

Why do we study the descriptive approach of decision-making?

Answer 11

1. Understanding our own decision-making processes helps clarify where we are likely to make mistakes and, therefore, when better decision strategies are needed
2. Optimal decision in a given situation often depends on the behavior of others. Understanding how others behave is critical to making the right choice.
3. Plenty of good advice exists, but people do not often follow it. They do not understand how they make decisions. They do not appreciate the need for improvement.

Question 12

Why do we “satisfice”?

Answer 12

We forgo the best solution in favor of one acceptable or reasonable (p5-6). We search until we find a satisfactory solution that will suffice because it is good enough.

Question 13

The concepts of bounded rationality and satisficing show us that human ___ deviates from rationality.

Answer 13

judgment

Question 14

How did Amos Tversky and Daniel Kahneman expand on Simon’s work?

Answer 14

They filled in critical details about specific systematic biases that influence judgment. Their work laid the foundation for our modern understanding of judgment.

Question 15

What is heuristics?

Answer 15

People rely on several simplifying strategies or rules of thumb when making decisions. These simplifying strategies are called heuristics.

Question 16

Heuristics serve as a mechanism for coping with the complex environment surrounding our ___

Answer 16

decisions

Question 17

What are the four ways our decision-making process is bounded?

Answer 17

1. Willpower - we tend to give greater weight to the present concerns than to the future (such as saving for retirement)
2. Self-Interest - We care about the outcomes of others
3. Bounded awareness - a broad category of focusing biases or the common tendency to overlook the obvious, important, and readily available information that lies beyond our immediate attention.
4. Bounded ethicality - refers to the notion that our ethics are limited in ways of which we are unaware.

Question 18

What are the five systematic structures for understanding the bounds of our decision-making?

Answer 18

1. Bounded Rationality
2. Boudned Will-power
3. Bounded Self-interest
4. Bounded Awareness
5. Bounded Ethicality

Question 19

What are the four general heuristics on which we focus here?

Answer 19

1. Availability
2. Representativeness
3. Confirmation
4. Affect

Question 20

Explain the Availability Heuristic

Answer 20

People assess the causes of an event (in terms of frequency, probability, or likeliness) based on what is readily available in memory. For example, an event that evokes emotions and is vivid, easily imagined, and specific will be more available than an unemotional, bland, difficult to imagine, or vague event. (page 8)

Question 21

Explain the Representativeness Heuristic.

Answer 21

People tend to look for traits the individual may have that correspond to previously formed stereotypes. For example, extroverts, ex-athletes, or white men make the best salespeople. Or bankers are judging that a business will succeed based on similar past ventures.

Question 22

Explain the Confirmation Heuristic.

Answer 22

We use selective data when testing hypotheses, such as instances where the variable of interest is present. For example, analyzing marijuana users by studying marijuana users (should also include those not using marijuana and those who have/do not have the interest of study. Or an assumption that the given statement is true, so it supports the conclusion made on the study/analysis.

Question 23

Explain the Affect Heuristic

Answer 23

Most of our judgments follow an affective or emotional evaluation that occurs before any higher-level reasoning takes place—mostly used in the System 1 level of thinking. Based on mood, or how a manager can be reminded of a former spouse when determining who to hire. Stocks go higher on a sunny day. Feelings of outrage felt by jurors.

Question 24

For change to occur and last over time, individuals must do 3 things, what are they?

Answer 24

1. get the individual to “unfreeze” existing decision-making processes
2. provide the info necessary to promote change
3. create the conditions that “refreeze” new processes, thus making the change part of the individual’s standard repertoire.