Business Psychology: Rationality, Human Error, Decision-Making, and Grounded Rationality

Flashcards covering key concepts, vocabulary terms, errors, and theoretical models from lecture notes on rationality, dynamic decision-making, microworlds, decision quality, and grounded rationality.

Panglossians

According to Stanovich (1999), the group of theorists who view humans as inherently rational, arguing that evolution equipped individuals with high rationality as an essential survival mechanism.

Meliorists

According to Stanovich (1999), theorists who view human rationality as fallible but capable of improvement through education, learning, and cognitive tools.

Rationality Paradox

The apparent contradiction identified by Evans and Over (1996) between human intelligence (demonstrated by complex real-world achievements) and frequent errors in thinking when compared against formal normative standards.

Normativism

A psychological paradigm that evaluates the rationality of human decisions by comparing actual behavior against ideal, external standards such as logic, probability theory, and Homo Oeconomicus models.

Grounded Rationality

A meta-theoretical framework proposed by Elqayam (2012) that evaluates human behavior without universal normative standards, defining behavior as rational if it facilitates goal achievement within an agent's epistemic context and computational constraints.

Rationality1

Defined by Evans and Over (1996) as thinking, reasoning, or acting in a manner that is generally reliable and efficient for achieving one's personal goals.

Rationality2

Defined by Evans and Over (1996) as thinking, reasoning, or acting that is explicitly sanctioned by formal normative theories such as logic and probability.

Structural Rationality

A concept by Nida-Rümelin (2001) describing actions consistently aligned with long-term projects, character traits, and virtues, which require suppressing momentary inclinations to achieve long-term goals.

Punctual Rationality

A concept by Nida-Rümelin (2001) describing actions focused on immediate needs and momentary optimization, which often conflict with long-term structural goals.

Action Rationality

As defined by Greve and Ohlemacher (1995), the coherence of an action based on an individual's subjective beliefs, expectations, and intentions, asserting that actors always act rationally when meaningful action occurs.

Skill-Based Behavior

Rasmussen's (1983) level of human behavior representing highly practiced and automatic sensory-motor coordination that operates without conscious attention.

Methodical Rigidity (Methodismus)

The inflexible application of a learned sequence of action or procedure without considering changes in situational conditions, often driven by the motivation to reduce uncertainty and protect one's feeling of competence.

Encystment

A problem-solving error where an individual deals with a minor, manageable aspect of a complex problem in extreme detail while ignoring the central issues.

Microworlds

Computer-simulated scenarios (such as CHOCO FINE, MORO, and WINFIRE) designed to study human problem-solving and dynamic decision-making under realistic conditions of complexity, dynamics, and uncertainty.

CHOCO FINE

A business microworld simulation featuring over 1,000 variables where participants act as CEO to manage production, marketing, and sales while navigating information overload.

MORO

A complex microworld simulation of a semi-nomadic tribe in the Sahel zone, characterized by opaque, interconnected variables, time-delayed feedback, and delicate system balances.

WINFIRE

A highly dynamic microworld simulation where participants command fire-fighting units under time pressure to protect towns and forests from spreading fires.

Perceptual Defense

A cognitive error in which information that contradicts an active mental model or prior decision is actively blocked, denied, or ignored to maintain internal consistency or group harmony.

Horizontal Flight (Overplanning)

Fleeing a complex or threatening problem domain into detailed, elaborate planning within a peripheral, controllable area to create a false sense of security and competence.

Ballistic Action

Executing an action plan fully without monitoring, evaluating, or controlling its subsequent effects over time, often used to avoid detecting failure.

PSI-Theory

A computational cognitive architecture developed by Dietrich Dörner formalizing the dynamic interaction between cognition, emotion, and basic motivational need tanks (affiliation, certainty, and competence).

Decision Quality Matrix

A matrix illustrating that because external uncontrollable factors influence outcomes, decision quality must be evaluated by the decision-making process rather than the outcome alone.

Decision Awareness

The conscious realization by an actor that they are in a decision situation, distinguishing deliberate, goal-oriented choices from reflexes, habits, and automatisms.

Antagonistic Dialogue

Dörner's concept of an internal system of alternating self-interrogations (similar to opposing trial lawyers) that evaluates competing motives to reach a deliberate decision.

Meta-Conflict

A state reached when deliberating a decision becomes so prolonged and burdensome that the primary goal shifts to deciding whether to continue worrying about the decision itself.

Polytely

A core feature of complex problem situations in which multiple, frequently conflicting, goals must be managed and balanced simultaneously.

Multi-Level Model of Complexity

A framework developed by von der Weth (2001) structuring complexity across three levels: Task Level (objective conditions), Requirement Level (available strategies), and Experience Level (subjective perception).

Descriptivism

A research paradigm in cognitive psychology that investigates how people actually make choices and achieve goals, rejecting normative standards as benchmarks for human thought.

Epistemic Context

In grounded rationality, the full contextual background—including an agent's beliefs, desires, cognitive tools, limitations, and goals—that dictates rational action.

Finitary Predicament

Cherniak's (1986) concept highlighting universal biological and cognitive constraints—such as limited working memory and processing speed—that bound human computational capacity.

Hierarchy of Decisions

Nida-Rümelin's (2001) structural model illustrating how major decisions establish a framework that justifies smaller, punctual decision steps over time.

Analogia Praecox

The uncritical or premature transfer of an analogy—such as adopting a competitor's strategy—without evaluating if specific underlying situational conditions match.