Descriptive Approaches to Decision Making Chapter 12

Overview Two Approaches to Decision Theories Two Approaches to Decision Theories Optimizing—choose best option after thorough examination of all feasible options. Optimizing—choose best option after thorough examination of all feasible options. Satisficing—choose first satisfactory option. Satisficing—choose first satisfactory option. Decision Heuristic Effects Decision Heuristic Effects Representativeness Heuristic Representativeness Heuristic Availability Heuristic Availability Heuristic Anchoring Heuristic Anchoring Heuristic Framing Effects Framing Effects Information Utilization Information Utilization “GROUPTHINK” “GROUPTHINK”

Theoretical Approaches to Individual Decision Making Optimizing Decision Theory Optimizing Decision Theory Choose the best option after a thorough examination of all feasible options and all relevant information. Choose the best option after a thorough examination of all feasible options and all relevant information. Subjective Expected Utility Model (multiplying each option’s probability of occurrence with its “utility” for the decision maker) Subjective Expected Utility Model (multiplying each option’s probability of occurrence with its “utility” for the decision maker) Satisficing Decision Theory Satisficing Decision Theory Choose the first satisfactory option Choose the first satisfactory option

Decision Heuristic Effects (simplified methods for making judgments about objects and events) Representativeness Heuristic – use resemblance between different objects or events to estimate their relatedness (usually leads to correct conclusions) Representativeness Heuristic – use resemblance between different objects or events to estimate their relatedness (usually leads to correct conclusions) Availability Heuristic – estimate the likelihood of an event based on how easily it comes to mind (leads to satisfactory conclusions) Availability Heuristic – estimate the likelihood of an event based on how easily it comes to mind (leads to satisfactory conclusions) Anchoring Heuristic – initial value is used as a basis for estimating a whole series of values (leads to insufficient or incorrect conclusions) Anchoring Heuristic – initial value is used as a basis for estimating a whole series of values (leads to insufficient or incorrect conclusions) Framing Effects – occur when people’s judgments are influenced by the way in which the relevant information is worded Framing Effects – occur when people’s judgments are influenced by the way in which the relevant information is worded

Information Utilization Optimizing theory – presumes that all relevant information has an equal chance of being brought up during discussion Optimizing theory – presumes that all relevant information has an equal chance of being brought up during discussion Satisficing theory (information sampling model) – information is more likely to come up when more members are familiar with it Satisficing theory (information sampling model) – information is more likely to come up when more members are familiar with it Information that is shared within the group is more likely to be used Information that is shared within the group is more likely to be used Stress = Arousal (too little – not vigilant; too much – panic) Stress = Arousal (too little – not vigilant; too much – panic)

Groupthink Janis argues that groupthink occurs when groups under stress establish the norm that displaying consensus is the group’s number one priority; increased levels of cohesiveness lead to groupthink. Janis argues that groupthink occurs when groups under stress establish the norm that displaying consensus is the group’s number one priority; increased levels of cohesiveness lead to groupthink. Historical events support groupthink... Historical events support groupthink... Task cohesion vs. Maintenance cohesion Task cohesion vs. Maintenance cohesion

Summary Two Approaches to Decision Theories Two Approaches to Decision Theories Optimizing—choose best option after thorough examination of all feasible options. Optimizing—choose best option after thorough examination of all feasible options. Satisficing—choose first satisfactory option. Satisficing—choose first satisfactory option. Decision Heuristic Effects Decision Heuristic Effects Representativeness Heuristic Representativeness Heuristic Availability Heuristic Availability Heuristic Anchoring Heuristic Anchoring Heuristic Framing Effects Framing Effects Information Utilization Information Utilization “GROUPTHINK” “GROUPTHINK”

Conclusions... Group discussion helps individuals overcome the errors that the use of decision heuristics cause... BUT Group discussion helps individuals overcome the errors that the use of decision heuristics cause... BUT Group discussion also makes these errors more likely... AND Group discussion also makes these errors more likely... AND Results are contingent upon unique individuals, various heuristics, and specific judgments Results are contingent upon unique individuals, various heuristics, and specific judgments