Decision Making (Lecture 8, 9) Flashcards
System 1
Intuition, “Gut feel”
System 2
Logical, analytical, rule-based
6 Judgmental Heuristics
Availability, representativeness, anchoring and adjustment, framing, recency, confirmation.
Availability Heuristic
Assessing the probability of an event based on how easily occurrences come to mind. What is easily retrievable. (High name brand recognition) (Which transportation is safest?)
Representativeness Heuristic
Looking for traits that correspond to previously held stereotypes. (Engineers are nerdy introverts)
Regression to the mean
reverting to the averages level of performance, regardless of being better or worse than the mean.
Confirmation Heuristic
Confirming what one thinks is true without searching for disconfirming evidence. (Astrology, horoscope). Consistent with beliefs, interpreting ambiguity through pre-existing beliefs, cluster with those who support beliefs.
Anchoring and adjustment
Starting with initial value, but adjusting it to yield the final result. (Tversky wheel of fortune experiment)
Formal Techniques for countering bias
Decision trees, regression analysis, multiple alternatives and objectives.
Informal Techniques for countering bias
Devil’s advocate, consider quality of data, checklists, take the outside view.
Obstacles to countering biases
Blindspots, experience effect, availability bias, time consuming.
Group decision making pros
Diversity, broad information, independence, thinking capacity.
Group decision making trade-offs
Cost of coordination, differing views and languages.
Sources of agreement and harmony
Accuracy, absence of cognitive diversity, social influence, informational influence.
Group Think (Challenges)
Illusions of invulnerability, self censorship, strong pressure to conform (Vietnam War)
