Decision Making and Heuristics

Decision making

Involves generating, selecting, and or evaluating relevant choices, where the rules for

deciding are not obvious, and the choices involve some risk or uncertainty

We do the best we can

Classical Decision Making Approach

developed primarily by economists who believed

that people are always rational and carefully consider all of the options (this is pretty

artificially created, no stress, no emotion, lots of time)

Late 1700s: Jeremy Bentham and John Mills-> economic utility theory

(everything we do

is intended to increase access to something that we value/maximize our utility

Utility Theory 3 assumptions (this assumes that humans are always rational-> not

true obviously (i.e. emotional decisons or ones under stress)

1. People are completely informed of their options and consequences

2. People are sensitive to differences in these options

3. People always act to maximize that utility, whatever it is

Satisficing (Simon, 1957)

we engage in bounded rationality (logical to an extent) such

that we consider options until we encounter one that is “good enough” (satisficing)

Similar to car or apartment buying, we dont always consider ALL the options (half

algorithm and half heuristic)

Types of Heuristics & Misapplications

Humans tend to be lazy-> what do you have to do to survive not thrive (cognitive

economy to conserve energy), we utilize these a lot in decision making

This is an educated guess that has worked in the past

Representativeness Heuristic (Kahneman & Tversky, 1972)

The tendency to assume

that, if an object is similar to members of a particular category, it is probably a member of

that category itself (gives us inferential power/judgement)-> so powerful that it

overpowers other information

Ex: social stereotypes (librarian versus car salesman example)

Base rate information

data about the frequency or probability of a given item (70

librarians and 30 used car salesman-> should make you cautious)-> asked

knowledgeable others who knew about statistics and they totally ignored the data

as they were confident in the use of their heuristic (base rate neglect-> bounded

rationality)

Gambler’s fallacy

Belief that if an event has not occurred for a while, then it is more

likely to occur in the near future

Ex: Which is more likely when we flip a coin? (50/50)

HHHTTT or HHTHTT (the same probability, not conditional)

One arm bandits (ignoring that each pull of the arm is an independent event)

Law of large numbers

large samples will be representative of the population from

which they have been selected

Ex: Large versus small hospital-> 60% male birthrate example (we are more

likely to see a deviation in the smaller dataset because it is very limited)

Availability Heuristic (Tversky & Kahneman, 1973)

when people attempt to assess the

importance or frequency of an event, they tend to be guided by the ease with which

examples of that event come to mind

Ex: Married students of NCSU (responses differ between graduate students and

undergraduates)

Slovic, Fischoff, & Lichtenstein (1972) Availability heuristic

media and public estimates of the causes

of death -> people severly overestimated causes of death (said there were more

plane crashes than car crashes-> not true) -> media is powerful influencer

Five variables of availibility

Ease of searching (Kahneman & Tversky)

General World Knowledge

Familiarity

Vividness

Personal Relevance

Ease of searching (Kahneman & Tversky)

More words that start with k versus words that have k as the third letter?

Easier to search/predisposed

Ease of searching (Kahneman & Tversky)

More words that start with k versus words that have k as the third letter?

Easier to search/predisposed

Familiarity

Famous Names Study (Tversky & Kahneman, 1973)

Famous name study -> 50 male names and 50 female names -> but we

heard more famous female names and so we add weight to them and

then they stick out more and are more available to us to recall

Vividness

Airplane crashes versus car crashes

Videos of engine exploding of an airplane covered in the news but car

crashes are not

You will buy the brand you know best-> marketing strategy

Drunk driving discouragement

Personal Relevance

Jaguar versus Ferrari, when a friend chimes in with negative reviews (then you

may question yourself)

Consumer reports/reviews online versus reviews from people you know

Decison Frames

The way that a question is framed (worded) or the background information provided can

have an important effect on people's decisions

The Framing Effect

the tendency to answer a question differently when it is phrased or

worded differently (people tend to flip from risk averse to risk taking based on a couple of

different words)

Examples:

up to 100% effective

American express-> convenience fee to the customer (credit card per gallon is

ALWAYS more expensive because they are passing along that convenience fee,

no one even talks about cash as no one carries it anymore)

If this was more well known, people would not be very happy

Home insurance (comprehensive home insurance or includes everyhting but

flood)

Prospect theory

three main components: loss aversion (losses loom larger than

equivalent gains), the certainty effect (people overweight sure outcomes), and the

isolation effect (people simplify choices by ignoring common elements). This theory

explains systematic biases in human judgment and has applications in economics,

finance, and marketing

Example: The Disease Problem-> basis for prospect theory

Imagine that the U.S. is reparing for the outbreak of an unusual disease, which is

expected to kill 600 people. Two alternative programs to combat the disease

have been proposed. Assume that the exact scientific estimate of the

consequences of the programs are positively framed version

Positively framed version

If Program A is adopted, 200 people will be saved. [72%]

If Program B is adopted, there is 1/3 probability that 600 people will be saved , and 2/3

probability that no people will be saved. [28%]

Which of the two programs would you favor?

When positively framed, people want to go with the sure win (risk averse)

Negatively framed version

If Program C is adopted, 400 people will die. [22%]

If Program D is adopted, there is 1/3 probability that nobody will die, and 2/3 probability

that 600 people will die. [78%]

Which of the two programs would you favor?

When negatively framed, people are more likely to be risk takers

Illusory correlation

spurious cause-effect relationships (cross-species effects), skinner

studied this with pigeons-> what happens when you randomly get food (pigeons are

trying to figure out cause and effect when there wasnt one-> superstitious behaviors->

can also see this in humans)

Ex- political affiliation and stance on abortion (based on prejudice)

2000, wasnt as big as an affiliation as you think -> some studies show

that correlation with facial hair has a bigger correlation than political

affiliation and stance on abortion

Sunk-cost fallacy

continuing to invest resources simply because you have done it before

Ex- star wars defense system (billions of taxpayer dollars paying for this when

the science is just not there says experts in the field)

Hindsight bias

retrospective consideration of events leading to outcome (“I knew it all

along, if I were the coach I would have done this because I knew they werent running

the ball→ no you didnt”)

People began to make distinctions between natural decision making and classical decision-making

1988 July 3rd USS Vincennes patrolling the water off the coast of Iran

Commercial airliner was shot down by us government and killed 290 civilians,

horrible mistake (congress wanted to know why)

Captain rogers was in a situation like that before and got shot up and lives were

lost so previous experience driving behavior

Lens model 1934 (Elon Brunswick)

Multiple fallible (ambiguous) cues in our environment due to perception

Queue (x1, x2, etc) (not on time, mixed use airport, not responding on radio, and

descending, no fire control radar)

Judgement

True value

Achievement: correlation between true value and judgement (if perfect then 1)

Gary Klein sources of power (naturalistic decision making)

Following fire chiefs around the countryside

Nurses in neonatal intensive care

distinctions between classical decision making and more naturalistic decision making

Discussion of Kaemf, Klein, Thordsen, & Wolf (1996)

Know the RPD model

Recognized problem-solving as a decision model

Go up to the situation, see a pattern of use, and recognize it as being some type

of event

Problems with the CDM methodology? (incident in the past-memory is not accurate,

hindsight bias, they are personally involved)

Clyde and others gave semi-structured interviews and asked the guided missile

cruisers to identify critical incidents that were challenging or difficult

130 different incidents

Sweep 1: What happened?

Sweep 2: Then put them on a timeline

Sweep 3: detect shifts in situational awareness

Decision points are consistent with shifts in understanding the

situation (situational awareness)

Sweep 4: Error search

Martha Hensley (situational awareness)

you want to be able to predict the status of

these in future situations

Perception elements, similar to lens model perception of cues

Comprehansion of meaning

Action

31 personnel and talked to them, then said that enlisted personnel dont have much to

offer and cut the participants in half and got rid of the technical crew members who

probably have more experience (important as these were experts and we want to

improve decision making)

Reliability of coding? 96.5%, pretty good

Details? Coded in a way that would support theories that kline had (situational

awareness, feature matching-recognition is automatic, story generation-awful situation

you have never experienced before, situational awareness)

78 actions in the incidents discussed

Novel course: problem solving and option generation

Selected course: more than one option and have to choose

Recognized: see something and you are primed to act in a certain way (95% of

the time doing what they are supposed to do, only 18% actually evaluated an

action, but delayed response)

Is RPD rational and how is it related to expertise?

How is situation awareness defined?