Summary: Decision Making

Read the summary and the most important questions on Decision making

• 1 Decision making: individuals and reality

• 1.1 notes

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• What is the classical decision theory?

  This classical theory states that people are "maximizers". People make rational decisions because:

  1. they have complete access to information
  2. they are able to process all information
  3. they are able to identify all possible solutions
  4. they are able to determine the consequences of each solution
  5. select the optimal solution

   

• what is the theory of bounded rationality

  according to Simon (1976):

  1. the world is large and complex and people do not have the capicity to understand everything and process everything.
  2. people are rational but only to a certain extent (bounded rationality)
  3. people seek for satisfactory solutions, rather than optimal ones.

   

• What flaws do people make when processing information?

  inferences: drawing conclusions with limited information

  heuristics: mental shortcuts not based on logical odds

• heuristics (=shortcut) during decision making

  • stereotyping (is Per a businessman or a librarian?)
  • representativeness heuristic:
  •        conjunction fallacy: the more specific and the more information, the more a scenario is seen as likely
  •        gambler fallacy (example roulette) we see non randomness when there is randomness
  • Anchoring and adjustment heuristic: rely on our first impression, early evidence is often thought to be more important in a sequence of information. (priming)
  • availability heuristic: base decisions on what is remebered rather than complete data. tendency to overestimate the probabilities of events associated with memorable thoughts.

• 1.2 Dijksterhuis (2004) think different: the merits of unconsious thought in preference development and decision making

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• What is the theoretical background of this article? Dijksterhuis (2004)

  It is not clear of unconscious thought or conscious thought leads to the best decision. Our information capacity is limited, conscious thought may led people to focus on limited set of attributes. not thinking about a problem may lead people to forget wrong heuristics. the unconscious may continue to think in the absence of any conscious attention.

• Can you name characteristics of conscious thoughts? Dijksterhuis (2004)

  Conscious thought refers to cognitive process one consciously aware of while attending a task. the processing capacity is low. We can only takes a subset of information into account and let relevant information out by taking a decision.

• Can you name characteristics of unconscious thoughts? Dijksterhuis (2004)

  Unconscious thought refers to cognitive processes that take place outside conscious awareness. unconsciousness has no capacity problem.

• What is the research question? and hypotheses Dijksterhuis (2004)

  Who is the better decision maker? unconsciousness of consciousness?
  three main hypotheses:
  H1: a period of unconscious thought will lead to a better decision relative to conditions under which conscious thought is prevented. (immediate condition)
  H2: when making complex decisions, conscious thought is inferior relative to unconscious thought.
  H3: unconsious thought is better because of polarization and clustering.

• what can you tell about the experiment 4-5? Dijksterhuis (2004)

  experiment 4-5. what is the underlying proces of unconscious thought?
  polarization: negative attirbutes become less important and positive ones more dominant. clustering: pieces of imformation that load on the same dimension become clustered.
  same three coditions.
  in experiment 4 they assessed recognition, rather than measuring attitudes. participants task was to quickly decide whether an aspect belonged to roommate A B or C.
  in experiment 5 they assessed the clustering hypothesis. the partcipants task was to recall as many of the behavioral descriptions as possible.

• 1.3 Smith & Levin (1996) need for cognition and choice framing effects

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• What are the hypotheses? smith & levine (1996)

  Hypothesis: Decision makers with high need for cognition would be more resistant to framing biases.
  

  1. some people have a natural tendency to engage in and enjoy thought (need for cognition)
  2. people high in need for cognition are more likely to process information in careful and elaborate fashion
  3. they should therefore be less sensitive to framing effects than people low in need for cognition.