12 - Decision Making

Question 1

What is maximising?

Answer 1

Pursuing the “best” option

Question 2

What is satisficing?

Answer 2

Pursuing the “good enough” option

Question 3

Compared to satisficers, what are maximisers more likely to report, according to Schwartz’s (2002) study.

Answer 3

Recalling a recent purchase.
Maximisers more likely to report;
- Taking longer to decide
- Engage in more; social comparison, product comparison and counterfactual thinking
- Greater regret
- Less happiness

Question 4

In terms of decision making, what are maximising tendencies associated with?

Answer 4

Iyengar (2006) followed graduating students on job market.
Associated with;
- Greater option fixation
- Greater reliance on information gathering from external sources
- Improved job market performance (more interviews)
- Higher starting salary (~20% more)
- Greater negative affect

Question 5

What is the maximisation paradox and what are two reasons why it might occur?

Answer 5

Maximisers are objectively better off, but subjectively worse off.
Why?
- Increasing options gives more chances to increase paradoxes.
- Search process might raise expectations to unrealistic levels

Question 6

State the WRAP Process

Answer 6

Widen your options
Reality-test your assumptions
Attain distance before deciding
Prepare to be wrong

Question 7

Describe the W Process in WRAP

Answer 7

Widen Your Options

Narrow framing (prevent spotlight)
- Tend to consider one single option, vary, but with right kinds of questions

Generate other options by considering

• Opportunity cost
• “Vanishing Options” test
• How others solved same problem
• More than one option at the same time

More options need to be real, not sham options.

Question 8

Describe the R Process in WRAP

Answer 8

Reality-Test Your Assumptions

Counteract the confirmation bias

Consider the opposite

• Devil’s advocate
• Ask dis-confirming questions

Take the inside AND outside view

• Your specific situation
• How things generally unfold (look at averages)

Run small experiments

Question 9

Describe the A Process in WRAP

Answer 9

Attain Distance Before Deciding

Put emotion into perspective (short-term has big impact on decisions)

Outcome short-term emotion (10/10/10 analysis from now, consider outsider perspective [what would I tell my best friend])
Beware of status quo bias
Be true to core values

Question 10

Describe the P Process in WRAP

Answer 10

Prepare to be Wrong

Mitigate overconfidence

Anticipate a range of outcomes
Set a tripwire to alert you to re-consider your decision

Question 11

What are the biases the WRAP process tries to overcome in decision making?

Answer 11

Narrow framing
Confirmation bias
Short-term emotion
Overconfidence