10. Decision Making and Reasoning

DECISION MAKING

• Overview of decision-making processes

Judgment and Decision Making

• Key Topics:

  • Classical Decision Theory

  • Heuristics and Biases

  • Fallacies

  • Opportunity Costs

  • Group Decision Making

  • Benefits of Group Decisions

  • Groupthink

• Types of Reasoning:

  • Deductive Reasoning

  • Inductive Reasoning

Classical Decision Theory

• Economic Man and Woman Model for Decision Makers:

  1. Fully informed about all options and outcomes

  2. Sensitive to distinctions among choices

  3. Fully rational in decision-making

Subjective Expected Utility Theory

• Principle:

  • Human actions aim for pleasure and avoid pain

• Emphasis on subjective utility and probability in judgments

Heuristics and Biases

• Satisficing:

  • Choosing an option that meets an acceptable threshold, ignoring other choices

Elimination of Alternatives

• Procedure:

  • Focus on one aspect of each alternative individually without comparison

  • Example: Choosing a partner by evaluating appearance first, then personality, etc.

Representativeness Heuristic

• Description:

  • Inferring from characteristics of specific instances about the broader population

  • Example parsing through contexts, leading to sampling errors

Availability Heuristic

• Concept:

  • Judgments based on how easily instances come to mind relevant to a phenomenon

Anchoring and Framing

• Anchoring:

  • Evaluations adjusted based on specific reference points

• Framing:

  • Presentation of options influences decision-making tendencies

  • Preference for smaller, certain gains over larger, uncertain gains

Biases in Decision Making

• Illusory Correlation:

  • Seeing connections between unrelated events or attributes

• Overconfidence:

  • Overestimating one’s own skills and knowledge

• Hindsight Bias:

  • The perception that one could have predicted an outcome after knowing it

Fallacies in Decision Making

• Gambler’s Fallacy:

  • Belief that prior events influence the probability of future independent events

• Hot Hand Fallacy:

  • Assuming success will continue based on previous successes

• Conjunction Fallacy:

  • Higher estimates for specific subsets of events

• Sunk-Cost Fallacy:

  • Continuing investment in a decision due to prior investments

Group Decision Making

• Benefits:

  • Collective expertise enhances resources and ideas

  • Group memory typically surpasses individual memory with conditions:

    • Small groups

    • Open communication

    • Shared mindset

    • Group identification

    • Consensus on acceptable behavior

Groupthink

• Definition:

  • Premature decision-making to avoid conflict within a cohesive group

• Conditions Leading to Groupthink:

  1. Isolated, cohesive, homogeneous groups

  2. Lack of objective leadership

  3. High stress levels

Symptoms of Groupthink

1. Closed-mindedness

2. Rationalization distorts reality

3. Suppression of dissent

4. Formation of mindguards

5. Illusion of invulnerability

6. Illusion of unanimity

• Antidotes:

  • Encourage constructive criticism and seek impartial feedback

Deductive Reasoning

• Conditional Reasoning:

  • Based on rational thought, applicable in daily situations

  • General to specific

Types of Deductive Arguments

• Modus Ponens:

  • If p, then q; affirming p leads to q

• Modus Tollens:

  • If p, then q; denying q leads to not p

• Examples of Fallacies in Deductive Reasoning

  • Denying the Antecedent

  • Affirming the Consequent

Syllogisms in Deductive Reasoning

• Characteristics:

  • Conclusions drawn from two premises

  • Types:

    • Categorical Syllogism (statements about category memberships)

    • Universal Affirmatives & Negatives

    • Particular Affirmatives & Negatives

• Example:

  • All cognitive psychologists are pianists.

  • All pianists are athletes.

  • Thus, all cognitive psychologists are athletes.

Inductive Reasoning

• Base on empiricism, valuing experience and observation

• Example of Inductive Reasoning:

  • Noticing cleverness among math students can lead to a broad generalization about all students in math.

• Cautions against conclusiveness without comprehensive observation

Causal Inferences

• Basis for judgments about causation

  • Relationships can create illusory correlations

• Methods of Inference:

  1. Bottom-up Strategies:

     • Observations lead to prototypes focusing on relevant properties

  2. Top-down Strategies:

     • Selectively looking for consistencies and integrating concepts

Why Use Inductive Reasoning?

• To navigate variability in environments and predict events, reducing uncertainty.