Decision Making ET 305, Spring 2016 Instructor: Dr. Lu Yuan, CSP Email: Lu.Yuan@selu.edu Phone: 985-549-2189

Review: Cognition Four factors of selective attention Three perceptual processes Limits of working memory Long-term memory Basic mechanisms Organization of information Situation awareness and time-sharing Human factors design implications

Information Processing Models Wickens, C.D. (1992) Engineering Psychology and Human Performance, 2nd Edition. New York: Harper Collins.

Decision Making Basics We use different decision processes depending on the situation. In class, we will discuss three major classes of decision making models: Optimal model based on expected value, Information processing model that highlights heuristics and biases, and A model that addresses the context in which decisions are made in natural environments.

Definition of Decision Making It is a task in which: A person must select one option from a number of alternatives, There is some amount of information available with respect to the option, The timeframe is relatively long, The choice is associated with uncertainty or risk.

Three Phases of Decision Making Acquiring and perceiving information or cues relevant to the decision. Generating and selecting hypotheses or situation assessments about what the cues mean, regarding the current and future state relevant to the decision. Planning and selecting choices to take, on the basis of the inferred state, and the cost and values of different outcomes.

Decision-Making Models Normative decision models: Identifying the best decision to take, assuming an ideal decision maker who is fully informed, able to compute with perfect accuracy, and fully rational. Descriptive decision models: Describing what people will actually do.

Normative Decision Model Utility: The overall value of a choice, or how much each outcome or product is “worth” to the decision maker. Multiattribute utility theory: Assumes all outcomes are certain The number of potential options The number of attributes or features that describe each option The difficulty in comparing alternatives on very different dimensions

Multiattribute Utility Theory: An Example of Car Purchase

Normative Decision Model Expected value theory: Assumes that the overall value of a choice is the sum of the worth of each outcome multiplied by its probability, e.g.: Winning $50 with a probability of 0.20, or Winning $20 with a probability of 0.60. Subjective expected utility (SEU) theory: Subjective probability times value of each outcome However, the value component is subjective, determined for each person

An Example of SEU Theory

Descriptive Decision Model Satisficing (Simon, 1957): People do not usually follow a goal of making the absolutely best or optimal decision. Instead, they opt for a choice that is “good enough” for their purposes, something satisfactory. The decision maker generates and considers choices only until one is found that is acceptable.

Naturalistic Decision Making: An Example of Fighting a Forest Fire

Heuristics and Biases Heuristics: Rules-of-thumb Usually very powerful and efficient But they do not always guarantee the best solution Occasionally lead to systematic flaws and errors Biases: Systematic flaws that represent deviations from a rational or normative model

Information-Processing Model of Decision Making

Information Processing Limits in Decision Making Cue reception and integration Hypothesis generation and selection Plan generation and action choice

Heuristics and Biases in Receiving and Using Cues Attention to a limited number of cues Cue primacy and anchoring: Information processed early is often most influential Inattention to later cues Cue salience Overweighting of unreliable cues

Heuristics and Biases in Hypothesis Generation, Evaluation and Selection Generation of a limited number of hypothesis Availability heuristic Representativeness heuristic Overconfidence Cognitive tunneling Confirmation bias

Heuristics and Biases in Action Selection Retrieve a small number of actions Availability heuristic for actions Availability of possible outcomes Hindsight bias: Monday Morning Quarterback Framing bias

Dependency of Decision Making on the Decision Context To the extent that people have the appropriate resources and can adapt them, they make good decisions. Skill-, rule-, and knowledge-based behavior Recognition-primed decision making

Skill-, Rule-, and Knowledge-Based Behavior

Skill-, Rule-, and Knowledge-Based Behavior People who are extremely experienced with a task tend to process the input at the skill-based level. People who are familiar with the task but do not have extensive experience tend to process input and perform at the rule-based level. When the situation is novel, decision makers do not have any rules stored from previous experience to call on. They therefore have to operate at the knowledge-based level, which is essentially analytical processing using conceptual information.

Recognition-Primed Decision Making Three critical assumptions: Experts use their experience to generate a plausible option the first time around. Time pressure should not cripple performance because experts can use rapid pattern matching. Experienced decision makers know how to respond from past experience.

An Integrated Model of Decision Making

Factors and Limitations Affecting Decision Making Inadequate cue integration Inadequate or poor-quality knowledge in long-term memory Tendency to adopt a single course of action and fail to consider the problem space broadly, even when time is available Incorrect or incomplete mental model

Factors and Limitations Affecting Decision Making Working-memory capacity and attentional limits Poor awareness of a changing situation and the need to adjust the application of a rule Inadequate metacognition leading to an inappropriate decision strategy for the situation Poor feedback regarding past decisions

Improving Decision Making Task redesign Decision-support systems Training

Decision-Support Systems Two design philosophies: Cognitive prostheses: Eliminating the defective or inconsistent decision making of the person Cognitive tools: Providing useful instruments to support adaptive human decision making

Decision-Support Systems Typical types: Decision matrices and trees Spreadsheets Simulation Expert systems Displays

Training Typical approaches: Teaching the analytical, normative utility methods for decision making Counteracting specific types of bias Allowing the natural use of various strategies Metacognition