Ment 3101 - Exam 1 part 4

Decision-making

the process of generating and choosing from a set of alternatives to solve a problem

3 decision making models

Rational decision-making model, bounded rationality, intuitive decision style

Rational decision-making model

a series of steps that decision makers should consider if their goal is to maximize the quality of their outcomes.

Problem with rational decision-making model

Not realistic, only a “perfect world” model

Bounded rationality

human decision-making is limited by available information, cognitive capacity, and time, leading people to choose "good enough" solutions rather than optimal ones

Intuitive decison-making

a cognitive process where you make choices based on subconscious pattern recognition, past experience, and gut instincts rather than step-by-step analytical reasoning

Anchoring effect

tendency to rely too heavily on one trait or piece of information when making decisions

Framing effect

tendency to make different decisions based on how a question or situation is phrased

Representativeness effect

tendency to assess the likelihood of an event by comparing it to a similar event and assuming it will be similar

Contrast effect

tendency to mentally upgrade or downgrade an object when comparing it to a contrasting object

Recency effect

tendency to weight recent events more than earlier events

Ratio effect

tendency to judge the same probability of an unlikely event as lower when the probability is presented in the form of a ratio of smaller than that larger numbers

Escalation of commitment

the decision to continue to follow a failing course of action

Organizational constraints on decision making

Performance evaluation, reward systems, formal regulations, system-imposed time constraints, historical precedents