Chapter 12 Flashcards
(54 cards)
decision
the choice made from two or more alternatives
rational
refers to choices that are consistent and value-maximizing within specified constraints
rational decision making model
six step decision making model that describes how individuals should behave in order to maximize some outcome
ASSUMPTIONS: have all info, identify relevant options without bias, chooses option with highest utility
Six-Step Rational Model
- Define the problem
- Identify criteria
- allocate weights to criteria
- develop alternatives
- evaluate the alternatives
- select the best alternative
bounded rationality
limitations on a person’s ability to interpret, process and act on information
- construct simplified models that extract essential features from problems avoiding complexity
satisficing
provide a solution that is both satisfactory and sufficient
Intuitive decision making
unconscious experience created from distilled experience
- relies on associations, fast and engages emotions
- hard to measure and analyze
- “unacceptable as proof, but good for setting up a hypothesis”
Common Decision Biases and Errors
- Overconfidence Bias
- Anchoring Bias
- Confirmation Bias
- Availability Bias
- Escalation of Commitment
- Randomness Error
- Risk Aversion
- hindsight bias
overconfidence bias
error in judgement that arises from being too optimistic about one’s own performance
- when people said they were 90% confident, they were only right about 50% of the time
- individuals with weak intellectual and interpersonal abilities are most likely to overestimate
anchoring bias
tendency to fixate on initial information, from which one then fails to adequately adjust for subsequent information
confirmation bias
tendency to seek out info that reaffirms past choices and discount information that contradicts past judgements
availability bias
tendency for people to base their judgements on info that is readily available to them rather than complete data
escalation of commitment
an increased commitment to previous decision despite negative information
randomness error
tendency of individuals to believe that they can predict the outcome of random events
risk aversion
tendency to prefer a sure gain of a moderate amount over a riskier outcome , even if the riskier outcome might have a higher expected payoff
hindsight bias
tendency to believe falsely, after an outcome of an event is actually known, that one coulee have accurately predicted that outcome
How to reduce risks and biases?
- Focus on goals
- look for information that disconfirms beliefs
- don’t create meaning out of random events
- increase your options
Strengths of Group Decision Making
- more complete information
- diversity of views
- accuracy
- creativity
- decision quality
- degree of acceptance
Weaknesses of Group decision making
- time consuming
- dominated by a few members
- ambiguous responsibility
Effectiveness (Group vs. Individual)
- depends on how you define effectiveness
- groups = more accurate than average individual but less accurate than judgements of most accurate individual
- individuals = faster
- groups = more creative
- groups = more acceptance
Efficiency (Group vs. Individual)
- group work consumes more hours
- when determining whether to use group or individual, assess whether increases in effectiveness offset the reductions in efficiency
Groupthink
a phenomenon in which group pressures for conformity prevent the group from critically appraising unusual, minority or unpopular views
Symptoms of Groupthink
- Illusion of invulnerability
- assumption of mortality
- rationalized resistance
- peer pressure
- minimized doubts
- illusion of unanimity
How to minimize groupthink?
- Monitor group size (as group size increases people become more hesitant)
- Encourage group leaders to play an impartial role (actively seek input from all members)
- Appoint one group member to play the role of devil’s advocate
- Stimulate active discussion of diverse alternatives to encourage dissenting views and more objective evaluations
