W2-3 Individual Decision Making

Question 1

How are the 3 ways decisions should be made?

Answer 1

1. Rational-Economic model: considers all possible alternatives, selects optimal solution, normative or prescriptive approach
2. Rational: maximize the chance of attaining an individual’s, group’s, or organization’s goals
3. Decision analysis: logical and systematic approach; MAUT Multiple Attribute Utility Theory; decision trees

Question 2

What are the 3 decision-making biases?

Answer 2

1. Confirmation bias: sampling on the dependent variable or overconfidence
2. Availability: anchoring or ease of recall
3. Representativeness: insensitivity to base rates; assess the similarity of outcomes as a basis for judgment

Question 3

2 solutions for confirmation bias (sampling on the dependent variable) :

Answer 3

1. search for disconfirming information
2. assign people to opposite sides of a case

Question 4

2 solutions for confirmation bias (overconfidence):

Answer 4

1. Recognize when this may present a problem
2. Actively seek out concrete measures or use established averages or metrics

Question 5

2 solutions for availability bias (anchoring):

Answer 5

1. Consider reasons why a given anchor might be inappropriate and consider other possible anchors
2. Disregard any anchors

Question 6

2 solutions for representativeness bias:

Answer 6

1. think critically about cause and effect
2. collect good data and avoid assuming causal relationships without supportive evidence

Question 7

Define framing:

Answer 7

The tendency for people to make different decisions based on how the problem is presented

Question 8

Decision making - Best practices (4)

Answer 8

1. Be more mindful of your “gut” instincts
2. Rely more on formal decision-making tools - but be careful how you use them
3. Anticipate ways in which your own decisions are likely to be biases
4. Anticipate others’ biases (help them make more rational decisions or exploit their errors)