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. . Decision Making as;d Reason;ag Chapter 12 First reporter: Denise Ann.

. . Table of Contents! Judgement and Decision Making Deductive Reasoning c C C c C C c c c c c C C C C C BadiC illanueva Gonzales Inductive Reasoning An Alternative View of Reasoning.

. . UUUUUUUUUU 01 Judgemental And Decision Making.

. . Introduction In the course of our everyday lives, we constantly are making judgments and decisions. One of the most important decisions you may have made is that of whether and where to go to college How do you go about making decisions?.

. . Classical Decision Theory The earliest models of how people make decisions are referred Among the early models of to as "classical decision theory.' decision making crafted in the twentieth century was economic man and woman. This model assumed three things. First, decision makers are fully informed regarding all possible options for their decisions and of all possible outcomes of their decision options. Second, they are infinitely sensitive to the subtle distinctions among decision options. Third, they are fully rational in regard to their choice of options (Edwards, 1 954; see also Slovic, 1990.).

. . Classical Decision Theory We then can predict the optimal decision for that person. This prediction is based on the belief that people seek to reach well-reasoned decisions based on five factors: c C C c C C c c c c c C C C C C The first factor is consideration of all possible known alternatives, given that unpredictable alternatives may be available The second is use of a maximum amount of available information, given that some relevant information may not be available. The third is careful, if subjective, weighing of the potential costs (risks) and benefits of each alternative. The fourth is careful (although subjective) calculation of the probability of various outcomes, given that certainty of outcomes cannot be known. The fifth is a maximum degree of sound reasoning, based on considering all the aforementioned factors.

. . Classical Decision Theory According to subjective expected utility theory, the goal of human action is to seek pleasure and avoid pain. According to this theory, in making decisions people will seek to maximize pleasure (referred to as positive utility) and to minimize pain (referred to as negative utility). In doing so, however, each of us uses calculations of two things. One is subjective utility, which is a calculation based on the individual's judged weightings of utility (value), rather than on objective criteria. The second is subjective probability, which is a calculation based on the individual's estimates of likelihood, rather than on objective statistical computations..

. . Satisficing Perhaps we typically use a decision-making strategy he termed satisficing (Simon, 1 957). In satisficing, we consider options one by one, and then we select an option as soon as we find one that is satisfactory or just good enough to meet our minimum level of acceptability..

. . I J Eliminations by Aspect In elimination by aspects, we eliminate alternatives by focusing on aspects of each alternative, one at a time. In particular, we focus on one aspect (attribute) of the various options. We form a minimum criterion for that aspect. We then eliminate all options that do not meet that criterion. For the remaining options, we then select a second aspect for which we set a minimum criterion by which to eliminate additional options ..

. . Eliminations by Aspect We often use mental shortcuts and even biases that limit sometimes distort our ability to make rational decisions. key ways in which we use mental shortcuts centers on our of probability. and One of the estimations Another probability is conditional probability. It is the likelihood of one event, given another..

. . Naturalistic Decision Making Many researchers contend that decision making is a complex process that cannot be adequately reproduced in the laboratory. This is because real decisions are frequently made in situations where there are high stakes. For instance, the mental state and cognitive pressure experienced by an ER doctor encountering a patient is difficult to reproduce outside a clinical setting. This criticism has led to the development of a field of study that is based on decision making in natural environments.

. . . Working making, solving . improve forming Group Decision Making as a group can enhance the effectiveness of decision just as it can enhance the effectiveness of problem Many companies combine individuals into teams to decision making (Cannon-Bowers & Salas, 1998). By decision-making teams, the group benefits from the I expertise of each of the members. There is also an increase in resources and ideas (Salas, Burke, & Cannon-Bowers, 2000) . Another benefit of group decision making is improved group memory over individual memory (Hinsz, 1990) ..

. . Group Decision Making There are some disadvantages associated with group decision making. Of these disadvantages, one of the most explored is groupthink. Groupthink is a phenomena characterized by premature decision making that is generally the result of group members attempting to avoid conflict (Janis, 1971)..

. . Croup Decision Making What conditions lead to groupthink? Janis cited three kinds: c C C c C C c c c c c C C C C C (1) An isolated, cohesive, and homogeneous group is empowered to make decisions (2) objective and impartial leadership is absent, within the group or outside it (3) high levels of stress impinge on the group decision-making process.

. . Six Symptoms of Groupthinking Close-mindedness the group is not open to alternative ideas Formation "mindguard" for the group, one person appoints himself or herself the keeper of the group norm and ensures that people stay in line. Rationalization the group goes to great lengths to justify both the process and the product of its decision making, distorting reality where necessary in order to be persuasive. Feeling Invulnerable the group believes that it must be right, given the intelligence of its members information and the available to them. Squelching of dissent those who disagree are ignored, criticized, or even ostracized Feeling unanimous members believe that everyone unanimously shares the opinions expressed by the group.

. . Antidotes for Groupthink Janis has prescribed several antidotes for groupthink. For example, the leader of a group should encourage constructive criticism, be impartial, and ensure that members seek input from people outside the group. The group should also form subgroups that meet separately to consider alternative solutions to a single problem. It is important that the leader take responsibility for preventing spurious conformity to a group norm.

. . Heuristic and Biases People make many decisions based on biases and heuristics (shortcuts) in their thinking (Kahneman & Tversky, 1972, 1 990; Stanovich, Sai, & West, 2004; Tversky & Kahneman, 1993 ) . These mental shortcuts lighten the cognitive 1971, load of making decisions, but they also allow for a much greater chance of error..

. . Heuristic and Biases Representativeness In representativeness, we judge the probability of an uncertain event according to (1) how obviously it is similar to or representative of the population from which it is derived and (2) the degree to which it reflects the salient features of the process by which it is generated (such as randomness) (see also Fischhoff, 1999; Johnson-Laird, 2000, 2004) ..

. . I Heuristic and Biases Base rate refers to the prevalence of an event or characteristic within its population of events or characteristics. In everyday decision making, people often ignore base-rate information, but it is important to effective judgment and decision making. In many occupations, the use of base-rate information is essential for adequate job performance. Availability Most of us at least occasionally use the availability heuristic, in which we make judgments on the basis of how easily we can call to mind what we perceive as relevant instances of a phenomenon (Tversky & Kahneman, 1973; see also Fischhoff, 1999; Sternberg, 2000) ..

. . Heuristic and Biases Other Judgment Phenomena A heuristic related to availability is the anchoring-and-adjustment heuristic, by which people adjust their evaluations of things by means of certain reference points called end-anchors Another judgment phenomenon is illusory correlation, in which we tend to see particular events or particular attributes and categories as going together because we are predisposed to do so (Hamilton & Lickel, 2000).

. . I Heuristic and Biases Another common error is overconfidence-an individual's overvaluation of her or his own skills, knowledge, or judgment . Because of overconfidence, people often make poor decisions. These decisions are based on inadequate information and ineffective decision-making strategies An error in judgment that is quite common in people's thinking is the sunk-cost fallacy (Dupuy, 1998, 1999; Nozick, 1990). This is the decision to conrinue to invest in something simply because one has invested in it before and one hopes to recover one's investment Hindsight bias-when we look at a situation retrospectively, we believe we easily can see all the signs and events leading up to a particular outcome (Fischhoff, 1982; Wasserman, Lempert, & Hastie, 1991 ) •.

. . Neuroscience of Decision Making As in problem solving, the prefrontal cortex, and particularly the anterior cingulate cortex, is active during the decision-making process ( Barraclough, Conroy, & Lee, 2004; Kenner ley & associates, 2006; Rogers & associates, Explorations of decision making in monkeys have noted activation in the parietal regions of the brain (Platt & Glimcher, 1 999) 2004) ..

. . Neuroscience of Decision Making Reasoning Judgment and decision making involve evaluating opportunities and selecting one choice over another. A related kind of thinking is reasoning. Reasoning is the process of drawing conclusions from principles and from evidence (Leighton, 2004a, 2004b; Leighton & Sternberg, 2004; Sternberg, 2004; Wason & Johnson-Laird, 1972).

. . Deductive Reasoning is the process of reasoning from one or more general statements regarding what is known to reach a logically certain conclusion (Johnson-Laird, 2000; Rips, 1999; Williams, 2000). Inductive Reasoning is the process of reasoning from specific facts or observations to reach a likely conclusion that may explain the facts..