L9 - Decision Making

Question 1

Discuss individual differences in decision making tendencies

Maximising vs. Satisficing

Answer 1

Maximising: pursuing the ‘best’ option
o Quite fixated about generating as many options as you can so you can pick the best option

Satisficing: pursuing the ‘good enough’ option
o Tend to consider fewer options, so come across their decision much quicker than maximisers

Question 2

What are the consequences of the maximising mindset

Answer 2

Maximising mindset activates cognitions related to scarcity
o Best outcomes are scarce

Scarcity promotes immoral behaviour when that behaviour allows for personal gain
o Scarcity promotes self-interested behaviour
o Financial deprivation increased tendency to cheat for monetary gain

Question 3

Describe Goldsmith et al.’s (2018) Study 3 on the ‘maximising mindset’

Answer 3

Chinese participants

Cover story: better understand current housing problems in major cities in China

Maximising mindset vs. neutral mindset e.g.
o Which of the five cities below is the best city to live? Vs. Do you live in Beijing now?

Scarcity index:
o “I am lacking house”, “I am lacking money”

Willingness to engage in immoral behaviour:
o “How permissible would it be for you to apply for government-subsidised housing even if you have your own housing?”

Results:
o Compared to neutral mindset, participants in maximising mindset condition reported:
 Higher scores on scarcity index (maximising mindset on scarcity scales)
 Greater willingness to engage in immoral behaviour (thought the behaviour was more permissible)
o Cognitions related to scarcity mediated the relationship between maximising mindset and willingness to engage immoral behaviour

Conclusion:
o Maximising mindset activates cognitions related to scarcity, which leads people to be more willing to engage in immoral behaviour

Question 4

What does the WRAP process stand for?

Answer 4

Widen your options

Reality-test your assumptions

Attain distance before deciding

Prepare to be wrong

Question 5

Describe common biases associated with WIDEN YOUR OPTIONS and how to overcome everyday consumer decisions

Answer 5

Narrow framing
o We tend to consider a single option, i.e. “whether or not” decisions
 E.g. “Should I buy the Audi or not?” – framing the decision in a very specific way
o Instead we should be considering multiple options, by asking the right kinds of questions
 E.g., “What’s the best way I could spend some money to solve my transport problem?”

Generate other options by considering:
o Opportunity cost
 Buy the Audi, or not buy the Audi and keep the $13,500 for other purchases
o The ‘vanishing options’ tests
 If you no longer had that option on that table, what would you do
 This usually helps you break out of the narrow frame, because you are able to solve the problem when in a different frame of mind
o How others have solved the same problem
o More than one option at the same time (multitrack)
- Adding just one more option can improve decision making
- Ensure that the options are real (not sham options)

Question 6

Describe common biases associated with REALITY-TEST YOUR ASSUMPTIONS and how to overcome everyday consumer decisions

Answer 6

Counteract the confirmation bias by:
o	Consider the opposite 
	Devil’s advocates (why shouldn’t I buy the Audi)
	Ask disconfirming questions
o	Take the inside view AND the outside view (what people think about it AND what the actual statistics say)
	Your specific situation
	How things generally unfold
o	Run small experiments

Question 7

Describe common biases associated with ATTAIN DISTANCE BEFORE DECIDING and how to overcome everyday consumer decisions

Answer 7

Put emotion in perspective
o Overcome short-term emotion
 10/10/10 analysis (10 minutes, 10 months, 10 years from now)
 Consider an outsider’s perspective: what would I tell my best friend to do in this situation
o Beware of the status quo bias
 Loses are weighed more heavily than gains
 That’s why we coast along the status quo, because we are afraid of what we can loose
o Be true to your core values

Question 8

Describe common biases associated with PREPARE TO BE WRONG and how to overcome everyday consumer decisions

Answer 8

Mitigate overconfidence
o Anticipate a range of outcomes, good and bad
o Set a tripwire to alert you to re-consider your decision

Question 9

What are some common biases with regard to consumer decision making

Answer 9

Narrow framing
Confirmation bias
Short-term emotion
Overconfidence