OB Lecture 4, Chapter 6, Perception and Individual Decision Making

Perception/Interpretation

A process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment

Objective Reality

Sources that have an unclear meaning that enable subjective interpretations of reality

Attribution Theory

An attempt to explain the ways we judge people differently, depending on the meaning we attribute to a behavior. (Is an individual’s behavior internally or externally caused?)

Fundamental attribution error:

The tendency to underestimate the influence of external factors and overestimate the influence of internal factors when making judgments about the behavior of others

Self-serving bias

The tendency to attribute your succeses to internal factors and put the blame for failures on external factors. (Succes → je hebt het goed gedaan, Falen → het is de schuld van andere factoren)

Selective perception

The tendency to selectively interpret what one sees based on one’s interests, background, experience and attitudes

Halo effect

The tendency to draw a positive general impression about an individual based on a single characteristic(HALO = POSITIVE)

Horns effect

The tendency to draw a negative general impression about an individual based on a single characteristic. (HORNS = NEGATIVE)

Stereotyping

Judging someone based on one’s perception of the group to which that person belongs

Contrast effect

Evaluation of a person’s characteristics that is affected by comparisons with other people recently encountered who rank higher or lower on the same characteristics

Rational

A style of decision making characterized by making consistent, value-maximizing choices

Rational decision-making model(Definition)

A decision-making model that describes how individuals should behave in order to maximize some outcome(Onthoud: Rational → maximize outcome)

Rational decision-making model(Steps)

1. Define the problem

2. Identify the decision criteria

3. Allocate weights to the criteria

4. Develop the alternatives

5. Evaluate the alternatives

6. Select the best alternative(Highest utility)

Bounded rationality

A simplified process of making decisions by perceiving and interpreting the essential information cues(Onthoud: Bounded rationality → simple, minimized; good enough not perfect)

Heuristics

Mental shortcuts for solving problems in a quick way

Common Natural Heuristic: Confirmation bias

The tendency to seek out information that reaffirms past choices and current views, and to discount information that challenges them

Common Natural Heuristic: Availability bias

The tendency for people to base their judgments on information that is readily available to them

Common Natural Heuristic: Overconfidence Bias

A tendency to be overconfident about our own abilities or the abilities of others

Common Natural Heuristic: Anchoring Bias

A tendency to fixate on initial information from which one then fails to suitable adjust for other information

Common Natural Heuristic: Escalation of commitment

An increased commitment to a previous decision, despite negative information

Common Natural Heuristic: Risk aversion

The tendency to prefer a sure gain of a small amount than over a riskier outcome with higher payoff

Common Natural Heuristic: Randomness error

The tendency of individuals to believe that they can predict the outcome of random events

Common Natural Heuristic: Hindsight bias

The tendency to believe falsely, after an outcome of an event is known, that one would have predicted that exact outcome.(Ik wist dat dat zou gebeuren)

Common Natural Heuristics characteristics

• Are prone to suffer from bias error

• Can lead to some survival advantage

Decision Making: Utilitarianism

An ethical perspective in which decisions are made to provide the greatest good for all(Treinspoor dilemma)

Decision making: Deonance

A perspective in which ethical decisions are made because you ought to in order to be consistent with moral norms, principles, standards, rules or laws

Takeaways(Key points)