Decision-Making Flashcards

Flashcards about Decision Making based on lecture notes.

What is Decision Making?

The process of developing a commitment to some course of action/choice; also the process of problem-solving, where a problem is a gap between a current state and desired state.

What are the characteristics of a Well-Structured Problem?

Clear/obvious outcome; may have past experience with the problem or standardized methods to solve it.

What are the characteristics of an Ill-Structured Problem?

Unpredictable outcome; complex and has a high degree of uncertainty.

What are the key differences between System 1 and System 2 thinking?

System 1: Fast, unconscious, automatic, used for everyday tasks, error-prone. System 2: Slow, conscious, effortful, used for complex issues, more accurate.

What is Rational Decision-Making?

A process of choosing a course of action out of a number of different alternatives, aiming to make consistent, value-maximizing choices within specified constraints.

What are the steps in the Rational Decision Model?

1. Define the problem 2. Identify the criteria 3. Allocate the weights to the criteria 4. Develop alternatives 5. Evaluate the alternatives 6. Select the best alternative

What are the assumptions of the Rational Model?

Problem clarity, known options, clear preferences, constant preferences, no time or cost constraints, maximum payoff.

What is Bounded Rationality?

Limitations on a person’s ability to interpret, process, and act on information; includes political, resource, and self constraints.

What is the difference between Satisficing and Maximizing?

Satisficing accepts 'good enough,' while maximizing exhaustively seeks the best option.

What is Perception?

The process by which individuals select, organize, and interpret their impressions to give meaning to their environment.

According to Attribution Theory, what are the two categories of causes to which we attribute behavior?

Internal or External.

What are the determinants of attribution?

Distinctiveness, Consensus, Consistency.

What is Self-Serving Bias?

When we are successful, we focus on internal factors; when we fail, we blame external factors.

What is Fundamental Attribution Error?

In others, we tend to underestimate the external factors and overestimate internal factors, especially when others are unfamiliar and their behavior is negative.

What is the Halo Effect?

Drawing a general impression about an individual based on a single characteristic.

What is the Contrast Effect?

A person’s evaluation is affected by comparisons with other individuals recently encountered.

What is Intuition?

Non-conscious process created from experiences, involving quick decisions, past experiences, holistic associations, and emotions.

What are Heuristics & Cognitive Biases?

Mental shortcuts that are efficient but not always accurate, leading to systematic and predictable errors or cognitive biases.

What is Overconfidence Bias?

Believing too much in our own ability to make good decisions, especially when outside of our own expertise.

What is the Dunning-Kruger Effect?

Low ability individuals think they are better than they are.

What is Confirmation Bias?

Selecting and using only facts that support our decision.

What is Availability Bias?

Emphasizing information that is most readily at hand (recent & vivid).

What is Hindsight Bias?

Tendency to believe we could accurately predict the outcome, after the outcome of the event is known.

What is the Planning Fallacy?

Underestimating the time it will take to complete a task.

What is Prospect Theory?

A theory that describes the ways in which people make decisions based on the potential value of losses and gains rather than the final outcome.

What is Risk Aversion?

The tendency to prefer a sure gain over a riskier outcome; people prefer to take chances to prevent a negative outcome.

What is Framing?

Presenting one of two equivalent value outcomes either in positive or gain terms (positive framing) or in negative or loss terms (negative framing).

What is Sunk Cost Fallacy?

Continue to rationalize decisions, actions, and investments in an existing cost despite increasingly negative outcomes; a cost that has already been paid and thus cannot be recovered.

What is Escalation of Commitment?

Repeating or further investing in an apparently bad decision.

How do emotions affect decision-making?

Emotions form preferences before conscious evaluation; moods and emotions affect the decision process; emotions serve as information in decisions.

How do positive and negative affects influence the decision-making process?

Positive affect prompts more creative thinking and greater cognitive flexibility, but also irrational optimism; negative affect induces more rigid thinking and quicker decision making, but reduces overconfidence.

According to Kahneman et al. (2011), what are some things to consider Before You Make That Big Decision?

Self-interested biases, affect heuristic, group think, saliency bias, confirmation bias, etc.